(Kitco News) - A solid earnings season with record cash flows and robust production has made the mining sector extremely investable, and according to two mining executives, it's only a matter of time before interest moves from senior producers to junior explorers.
In an interview with Kitco News, American Pacific CEO Warwick Smith and Managing Director of Exploration Eric Saderholm said higher gold and copper prices are bringing new attention to the mining sector; however, they noted that companies still have more work to do to attract investors' attention in a world filled with chaos.
Smith explained that despite improving sentiment in the mining sector, growing economic uncertainty is prompting investors to hoard cash or invest in alternative assets like crypto. He pointed out that crypto is attracting significant attention because of how much money investors have made in the sector.
He pointed out that Bitcoin’s recent 20% correction, as prices briefly dropped below $80,000 a token, hasn’t fazed many investors, who are still sitting on long-term profits.
“A lot of these young investors are trading cryptocurrencies because they can do it unemotionally,” he said. “They are buying and selling smaller coins. They can take advantage of the liquidity and because it's easy, they can do it 24 hours a day on their cell phones. You can’t do that with junior mining stocks.”
However, Smith said that the sector as a whole has to reach out to a broader audience with the message that the mining sector, particularly the junior space, is profitable. He pointed out that in 2024 he started a podcast and interviewed famous executives like Bruce Stein, a former executive at Mattel who was the co-founder of Axiom Gaming, which owns Team Liquid, the most successful esports franchise. Smith also talked with David Williams, who came second in the 2004 World Series of Poker and took home $3.5 million.
“These conversations had nothing to do with mining but they are like a trojan horse to get our name in front of people who would never normally look at a mining stock,” he said. “It’s about playing the long game and it can work. We need to find different ways of getting the message out because that is the only way we will attract new investors to mining.”
While the sector has struggled to get the message out, both Smith and Saderholm said they are starting to see a shift, and investors are becoming more receptive. Saderholm said consumers are starting to realize the importance of metals like copper in their daily lives and a potential global trade war has put a premium on domestic supply chains.
In a recent note, American Pacific pointed out that premiums for U.S. copper futures have widened to over $800 per tonne above London prices, the highest level since early 2020, as U.S. buyers compete to secure copper supplies in anticipation of potential tariffs.
“Copper is not just another base metal, it is extremely important. Every American requires 12 pounds of copper to maintain their standard of living,” said Smith. “With projects like our Madison Copper-Gold project in Montana and Palmer Copper-Zinc project in Alaska, we are well-positioned to potentially supply the growing domestic demand for copper, a critical metal for the U.S. economy and clean energy transition.”
Although some economists have said that a global trade war could slow down the global economy, Saderholm said the fundamental supply and demand imbalance in copper could insulate prices from a potential recession.
He pointed out that there is not enough supply to meet even dampened demand.
“Copper is on a steady trajectory higher,” he said. “The supply of copper down the road is not going to be adequate to meet demand. Copper prices are going to find their traction out of necessity more than anything else.”
Saderholm pointed out that a dearth of investment in copper production has left the world in short supply and it will take years to shift this dynamic.
However, Saderholm said he is a little more cautious about gold as the price has run to fresh all-time highs fairly quickly.
“Compared to copper, I think gold is a little overdone,” he said. “It really wasn’t too long ago when we were talking about $2,000 and now we are talking about $3,000 gold prices. I wouldn’t be surprised to see gold prices come back down to $2,700 in the near term before it takes another run higher.”
