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Mining sector finally beginning to pull out of one of its worst slumps in living memory, driven by electric dreams

For one thing, there’s the new dynamic in the global economy being created by the drive towards electric cars and lithium batteries in general
Electric vehicle
Debate rages about how much lithium will really be needed, but there will be plenty of hot money flowing into exploration and development

Appearances can be deceptive, but judging by the look and feel of London’s Mines and Money conference this November, the mining sector is finally beginning to pull out of one of its worst slumps in living memory.

This is not anecdotal. With the negative impact of Brexit on the UK economy overall, the devaluation of the pound as an attractive currency in which to raise and thence spend money, and the emptying of once-deep pools of capitals during the last crash, London’s position as a centre of mining finance isn’t what it was.

Which means that if the mood at this year’s Mines and Money was better, it’s a short leap to saying that elsewhere things are actually beginning to move quite fast.

For one thing, there’s the new dynamic in the global economy being created by the drive towards electric cars and lithium batteries in general. This has created opportunities for companies as diverse as Cornish Lithium, Savannah Resources (LON:SAV), European Metals Holdings (LON:EMH), Bacanora Minerals Ltd (LON: BCN) and others.

Cobalt into the blue

Cobalt companies have got in on that act too, and it was interesting to see a recent release from Horizonte Minerals (LON:HZM) talking about how much nickel will be used in electric batteries. King’s Bay Resources (CVE:KBG) is out looking for cobalt, eCobalt (TSE:ECS) already has plenty of cobalt, and there was even a new Cobalt-backed investment vehicle launched in Canada mid-year.

Debate rages about how much lithium will really be needed to satisfy the emerging demand, but until this market is mature, there’s likely to be plenty of hot money flowing into exploration and development.

Money back for exploration

Which brings us to a second theme of the year. Money is back for exploration. It’s still hard to raise, as Merlin Marr-Johnson highlighted in the run up to Christmas, as he brought new vehicle Erris Resources to market. Marr-Johnson raised several million out of Canada and the UK for deployment in drilling up Irish zinc assets. It wasn’t easy, but a year ago it would have been unthinkable.

At almost the same time Group Eleven Resources (CVE:ZNG), another Irish explorer, listed in Canada, and there has also been new activity and energy from Connemara Mining (LON:CON), following the appointment of Patrick Cullen as chief executive.

And it’s not just in Ireland that the exploration world has been brought back to life. In Australia, there’s a positive boom going on in the Pilbara, and the famous Mining Clock credited to, amongst others, Lion Selection Trust, shows that in Australia at least, the mining industry is closer to the end of the boom than it is to the start of it.

In Canada the atmosphere is more cautious, but there is nonetheless plenty of activity. Gold exploration conducted by juniors like Eastmain Resources (TSE:ER) and Balmoral Resources (TSE:BAR) has aroused considerable interest, while Excelsior Mining’s (TSE:MIN) plans to leach copper in-situ from a project in Nevada have attracted significant private equity backing.

Punters’ favourite is Sirius

In the UK, of course, Sirius Minerals (LON:SXX), continues to be a punters’ favourite, although analyst opinion remains divided as to the long-term viability of the project and its share price has drifted since the highs of late spring.

Sticking with the UK, the Hemerdon mine of Wolf Minerals (LON:WLFE) has continued to struggle, but a recent recovery in the tungsten price ought to bode well for a change in fortunes, not to mention featuring in a recent question on University Challenge.

Certainly, others in the tungsten space have enjoyed a recovery in confidence. Ormonde Mining (LON:ORM), also backed by private equity, is now pushing ahead with construction of the Barruecopardo project in Spain.

And if tungsten - a notoriously thinly-traded metal in a small market – is moving, then it’s a sure sign that metals markets in general are alive. Zinc has been a favourite metal this year, with the likes of Ferrum Crescent (LON:FCR) slipstreaming off the back of it, and copper has been in favour too as the global economy continues to perform well.

Gold an open question

It’s an open question what will happen to gold next year though. Big early news in the mining sector will be the planned February listing of Toro Gold in London. But what the pricing environment that it will begin trading in will be, isn’t clear.

For one thing, as President Obama’s policies finally bear fruit in the recovery of the US economy, the Fed will raise rates further. This has been well flagged, and will be a drag on gold. On the other hand, political risk remains high. The Chinese continue to fortify the Spratly Islands, President Trump has largely unravelled the US’s position as honest broker in the Middle East with his recognition of Jerusalem as the capital of Israel, and now that it’s been deprived of territory Islamic State may go back to doing what it does best – random acts of terror.

Beneath all that though is a growing social-media fuelled feeling in the West that the fabric which holds things together is slowly becoming unstitched. That may well be good for gold. What it portends for everything else, is an open question.

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