The Conversation (0)
Chris Berry, renowned analyst and co-author of the Disruptive Discoveries Journal tells us which commodities he believes you should look out for and what companies are best situated to take advantage of the current conditions.
By Sean Mason, SmallCapPower.com
At Small Cap Power, we recently had the privilege of catching up with renowned analyst and co-author of the Disruptive Discoveries Journal, Chris Berry. Chris told us first-hand which commodities he believes you should look out for, stay away from and what companies are best situated to take advantage of the current conditions. He even let us in on which stocks he believes could see some movement in the right direction.
To start, we asked Chris about what has been hot on the market recently–has the lithium bubble burst? According to him, lithium is just “taking a breather”, and that as of right now, its price is unsustainable, with the probability of it falling over the next eighteen months being very real. That being said, Chris did mention the price will settle above the average price of the last three to five years.
As many companies have now entered into lithium due to the run up in its price, Chris let us know that when deciding which companies have a shot at going into production, you need to look for the companies with binding take-offs. A binding take-off is a contract between a buyer and a seller to ensure that when a company starts producing there is a market that it can be sold on. Companies like Galaxy Resources, as well as Lithium Americas with its recent SQM joint venture, have positioned themselves to “survive and thrive over the next, three or four years as the production decision nears”.
Another metal that has benefitted from the increased demand for lithium-ion batteries is cobalt. With stocks already being bid up by investors, and there really only being two controlling entities in the business, Chris believes it will be a long road for companies to get cobalt projects together as they look to capitalize on the recent industry move. For the mining and trading of cobalt, Chris brought to light that Glencore owns those avenues and companies will have to ask themselves if they can compete with the giant, as for the refining sector, Chinese SOE has that locked down.
Even though the price of uranium has been depressed for some time, when asked about its future Chris wasn’t too optimistic regarding the next couple of years. Stating that the “muted demand is really rooted in stockpiles coming on the market, and [that] low natural gas prices, really…[are] curtailing the appetite for nuclear overall”. Although he believes that you may see a 30% spike over the next 18 months, with a $25 spot price, 30% isn’t anything to write home about.
With investors always looking for the next big thing, we asked Chris which commodity he believes shows the most promise moving forward. He believes that due to the current “situation where the current nickel cash cost curve is underwater to the tune of about 50% to 60% of global production…[its] unsustainable, and so you’re going to continue to see strength in the nickel market as production decisions get right-sized and mines get closed”.
The final question we had the opportunity to ask Chris brought us back to our discussion about Lithium Americas (TSX:LAC)and Galaxy Resources (ASX:GXY), who Chris believes are two stocks to watch as they are sustainable in the current environment and moving forward. There was also one more stock that he believes could take off, and it comes in the form of a technology company. Although not directly related to the mining industry, Nano One Materials (TSXV:NNO), a company trying to increase the energy density of a lithium-ion battery, is of note to watch. Through funding from the Canadian government, Nano One is chasing what Chris referred to as “the Holy Grail” of energy storage, by playing around with the chemistry of different cathode materials to increase the energy density of a battery.
There you have it, which stocks to look out for, what commodities will be going up, and how to really evaluate the future potential of a junior miner’s resource deposits, because if you have a product but no one is able to buy it, what is it actually worth?
Watch the video of the interview here.
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Editorial Disclosure: Galaxy Resources is a client of the Investing News Network. This article is not paid-for content.
