What parts of the mining industry could be impacted by the upcoming American presidential election? Experts share their thoughts.
It’s hard to believe that 2020 is almost over. While this year has brought many impactful moments, one of the most crucial events is still a few weeks away: the US presidential election.
COVID-19 and civil unrest remain pressing short-term concerns in the US, but important issues like mining regulations, energy, trade and oil and gas production will require attention longer term.
As President Donald Trump and Democratic nominee Joe Biden reach the final days of their campaigns, the Investing News Network (INN) spoke with resource sector market watchers to learn what’s at stake when it comes to commodities, and which party and candidate may be better for the space.
Read on to learn what they said about mining and the fast-approaching American election.
Regulatory environment hangs in the balance
The experts INN spoke to had different ideas about what the upcoming election could mean for the mining space as a whole, but many of their comments focused on regulation versus deregulation.
Taking a broad view, Byron King said that the “seeds of inflation” have already been planted by Washington, and that can be seen in housing, automotive and grocery prices.
As a result, he sees hard assets as the real winner regardless of which candidate comes out on top. “I think that it bodes well for hard assets no matter who wins, and that doesn’t even get into the policy stuff,” said King, who edits the Whiskey & Gunpowder newsletter at Agora Financial.
For his part, Mercenary Geologist Mickey Fulp emphasized that a Biden win would be bad for companies extracting resources or planning to do so.
“A Biden administration (would) be disastrous for mining in the US, absolutely disastrous,” he said. “All the gains we made over four years of the Trump administration will go down the toilet in my opinion, because (Biden/Kamala Harris are) anti-mining, anti-development and anti-Keystone pipeline.”
Taking a more middle-of-the-road view was Brent Cook of Exploration Insights. The senior advisor and geologist thinks a Democratic presidency would be consumed with tasks not related to mining. “I would suspect that Biden really isn’t going to be focused on those sorts of things,” said Cook. “There’s much bigger issues at stake that they’ll be focusing on.”
He does believe another Trump term could lead to deregulation, which may advance mining.
“The Forest Service and (the Bureau of Land Management) have to go by specific regulations, but it’s sort of driven from the top,” said Cook.
“Since Trump was elected, they have gotten a bit more lenient on some of the requirements and such. They have also acted a bit more quickly in granting permits for drilling and that sort of thing. So I would expect that continue under Trump,” he added.
King also sees Trump continuing to push a deregulation agenda, although he noted that this doesn’t mean every project will get a green light.
“Trump is kind of a known entity, he’s done things in terms of just reducing regulation, he’s tried to streamline (the process) more. So you don’t wait 20 years for your denial, you put your paperwork in and there is a reasonable timeframe. All of those things factor into the broad resource sector, and that means everything — gold, silver, copper, lead, zinc, rare earths.”
Biden unclear on plans for crucial oil industry
The commentators also spoke about a number of commodities specifically, with oil being one of them. King noted that in terms of policy, the Biden/Harris stance on fracking is causing him concern.
“(Biden/Harris) are on record as against fossil fuels, against fracking, so that will disrupt the oil sector and the fossil fuel sector — even the natural gas sector, the power-generation sector,” he said, using California’s energy crisis as an example.
The Democratic clean energy platform only mentions oil and gas briefly, stating that the party would implement “aggressive methane pollution” limits, ban new oil and gas permitting on public lands and protect water ways from oil spills.
Despite these strong climate-focused initiatives and a pledge to invest US$2 trillion to ensure America achieves a clean energy economy and net zero emissions by 2050, Biden’s plans for the US oil and gas sector remain unclear — a concerning point considering the US is the leader in oil production, a sector that brought in US$3.3 trillion for the country in 2019.
“I am concerned about near-term economic pressure putting oil into pressure again,” said Independent Speculator Lobo Tiggre.
“But I do think that oil, after the global economy starts going on the mend again, there’s likely to be a great time to ride oil, a big wave in oil higher. I’m not there yet, but I’m looking for that,” he continued.
As mentioned, Fulp has a negative outlook on what a Biden win would mean for the resource space, and he’s particularly concerned about the oil industry.
Expanding, Fulp pointed out that the Democratic platform is devoid of any goals or targets that are specific to the mining sector. In addition, Biden appeared to flip-flop on his anti-fracking stance just a few weeks ago, saying that he would only oppose it on public lands.
The lack of clarity, especially around fracking, is of the utmost concern for Fulp in a country that produces 13 million barrels of oil per day.
Rare earths supply still needs attention
Alongside oil, the industry insiders that INN talked to highlighted rare earths as an area that could be impacted by the US election. Rare earths have been especially controversial in recent years as American supply depends on the country’s relationship with top producer China, which dominates global output.
The metals, which have commonplace digital, electronic and green energy applications, have been used as a political pawn between Washington and Beijing in the past, and there is little doubt that issues over rare earths procurement will again pop up.
“Rare earths are certainly interesting. The problem is there’s so few places where the geologic environment is right for the deposition of rare earths,” said Cook. “The US is really not a great place for rare earths. We’ve got Mountain Pass, which always goes broke.”
“They’re getting funding from the government and other companies to see if they can extract the rare earths from minerals, but that’s a very expensive process. Whereas in China and a couple places in Africa and Russia, that’s where those rare earths can be produced right now at current prices,” he said.
Unlike other resources, the extraction of rare earths is quite complex.
“The difficulty with rare earths is they’re tied to the mineral at the atomic level, so you’ve got to almost break apart those atomic bonds,” added the geologist. “It’s difficult to do. Whereas the stuff in China, a lot of that has been broken down through weathering processes.”
Rare earths are also a cause of concern for King, who believes rare earths-focused projects and plans will need to go ahead whoever wins in November.
“Rare earths are so critical to modern technology, and relations with China are so bad and getting so much worse,” he said. The issue is so important that King believes the US and Canada need to work hand-in-hand to rebuild the rare earths sector in North America.
“It’s a minor niche, industrial angle, but it’s critical in the sense that you can’t do lightbulbs without rare earths, and you can’t do permanent magnets. You can’t do the auto industry without rare earths. And you can’t do the aircraft industry without rare earths and you can’t do electronics without rare earths. So it might be a small sector, but it’s going to have a big impact because it’s so critical and so pivotal.”
China’s ability to produce rare earths more cheaply has allowed it to maintain its hold on the sector, making the advancement of the space outside of the Asian nation a political issue. That’s a factor Tiggre sees increasing the challenges associated with the space.
“I’m certainly not saying there’s no money to be made there. It just it strikes me as very high risk. It’s a gamble on a political twist and turn that can be done and undone,” he said.
While rare earths are an uncertain play for Tiggre, he does believe that structural supply issues stemming from COVID-19 disruptions offer an opportunity.
“I think we will actually see a commodity supercycle with the precious metals and the energy commodities and industrial metals all surging higher, either because the economy recovers and the raw materials are needed,” said Tiggre. “Or because it doesn’t, and the stimulus really opens the inflationary floodgates to include infrastructure plans and other investing that would be good for commodities.”
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.