(Kitco News) - While investment capital flows into cryptocurrencies and AI technology, the neglect of “old-world industries” is putting society at risk, according to one fund manager.
In his New Year investment letter, Matt Geiger, Managing Partner at MJG Capital, stated that decades of undercapitalization in key sectors like mining, infrastructure, agriculture, and manufacturing have created a shortage of the essential minerals necessary for the energy transition, stagnation in food production, and inadequate critical infrastructure to support economic growth.
“The neglect of these old economy industries creates a systemic risk that jeopardizes our long-term resilience and prosperity. Unfortunately, given the current trajectory, it’s hard not to conclude that real pain must be felt before this problem is recognized for what it is, let alone addressed through years of sustained investment,” he said in the note.
In his report, Geiger noted that investment capital raised by junior exploration companies last year dropped to its lowest level in recent history.
At the same time, major producers are putting less capital into exploration. Quoting a recent study from PwC, Geiger highlighted that producers have invested less than 30% of EBITDA into capital expenditures, compared to 60% to 80% of EBITDA between 2012 and 2015.
Although the mining sector has struggled over the last decade, Geiger also noted that sentiment is starting to shift after gold prices rallied roughly 27% last year, achieving one of their best performances in recent history. He also pointed out that the mining sector saw an increase in merger and acquisition activity last year, which could spill into 2025.
“There remains opportunity for outsized returns by investing in skilled, well-incentivized teams focused on assets that provide enough scale to matter,” he said.
Heading into 2025, MJG Capital is most bullish on copper, which represents 36% of its portfolio. The firm also has significant exposure to precious metals equities, with 18% of its portfolio in gold, 10% in silver, and 7% in platinum group metals.
Geiger said he is also focused on agricultural commodities, with a total of 17% exposure in potash and phosphate equities. He added that this is the highest agricultural exposure the firm has had since 2021.
“It is worth noting that the MJG partnership’s combined exposure to prospect generation and exploration-stage companies is higher than it has been since mid-2020,” he said.
