Some commodities are in bear market price trends including the "green energy" ones like cobalt, nickel, copper and silver. Gold, platinum and aluminum are in downtrends too. As a result, many resource companies are also in bear markets.
Besides low commodity prices, other reasons include the increasing costs of labor, energy and equipment which reduces the valuation model for these companies.
Signals
However, this proposed legislation establishes a 12.5% royalty on new mining operations and an 8% royalty on existing operations. These are based on gross income. There is also a suggested hidden reclamation fee of 7 cents per ton of displaced material.
No matter how admirable the goals, these kinds of royalties and costs will not encourage new mining development on Federal lands particularly for critical metals and minerals. In fact, companies will not be able to afford these kind of costs and make any kind of mining profit at current prices.
2 Solutions
1) For better or worse, decreased mining activity will lead to supply shortages in time with significant commodity price increases solving many cost issues and resulting in major stock price advances.
However, those events are still some distance away for all the commodities listed above but it's coming.
Duplicating the average general standards, taxes and royalties of what most states require for mining on their lands would certainly be an effective compromise for mining on federal lands. While still costly, this would effectively update, monetize and modernize the antiquated Federal 1872 mining laws.
Sounds reasonable.
2/8/24
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A Green Caution Light
Unfortunately, solar and wind power are incapable achieving that goal all by themselves due to their variability in operation. The sun does not shine all day and sufficient wind speeds don't occur all day either to achieve the storage capacity required run things consistently.
Nuclear power is a lot safer now and can fill the the gaps where that technology is accepted.
Most forget, to build and maintain any of these items requires lots of energy such as electricity plus steel, copper, silver, oil and uranium, etc.
For example, how are you going to produce steel for mining these projects without coal or coke (derived from coal)?
Electric cars still need oil for transmission lubrication and other car parts as well as electricity to recharge. They also need 5x more copper than other vehicles and diesel fuel is required to mine this metal.
Getting totally rid of fossil fuels, which are necessary to build and support green energy projects, is not a realistic objective.
Supply Shortages
In terms of supply, general metal mining grades are gradually decreasing as the higher grades have already been mined. In particular, copper (for electricity, cars) and silver (for solar, etc) are getting harder to find and mine economically.
Commodities are in short supply, particularly copper while silver supplies are dwindling too. Discovery to production of 8 to 10 years exacerbates the supply issue. Any resource nationalism issue or increased country royalty, adds to the cost picture.
In Summary
Green energy is a certainly worthwhile goal but requires a lot of mining, energy and investment to produce a viable product and a favorable result.
Commodities are scarce, mining grades are declining and supplies are limited. One can make a lot of technical timing errors and still make lots of money long term in the green energy field.
I would first recommend long term investments in silver, copper, battery metals and uranium (URA).
A company with potentially significant resources in this general area is Group Ten Metals (CA:PGE). It is located immediately adjacent to the high-grade Sibanye-Stillwater PGE Mines, a likely suitor once a firm and large resources is established.
Trader Garrett
3/21/22 (Updated May 2022)
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