What are some of the trends you’ve noticed among TSX-listed miners over the past year?
We have seen funds flow to different commodities within the TSX listed miners at different times. Over the summer, we witnessed the huge rally in the precious metals sector. Consolidation has occurred continuously since the peak in July and continues until today. The copper stocks have risen relatively continuously over the past year and continue at record highs today. Uranium stocks were very quiet until December when they started a powerful five-month rally, which has come off its highs in recent days with the restart of Cigar Lake by Cameco. The battery metals enjoyed a strong rally in the fall which has persisted for some throughout Q1, but trailed off for others.
In terms of things to note regarding highlights on sectoral trends, what has been surprising is, firstly, the magnitude of the pullback in gold equities notwithstanding a reasonably strong gold price and a very supportive macro environment regarding the argument for gold in the coming decade. Secondly, the power of the uranium equity rally is noteworthy, despite a lack of performance in the uranium price itself. Finally, the apparent limitlessness of the copper rally has come as a surprise, even though the battle against COVID-19 is clearly still ongoing. In all three cases there is a disconnect, either between the equity and the commodity, or between the perception and the reality, and this needs to be resolved.
For all companies at which we look, whether listed on the TSX or elsewhere, we have an unrelenting focus on the quality of the orebody
In terms of your investment strategy, Queen’s Road Capital (TSXV: QRC) has a global approach to investing in the resources sector. Do you tend to select TSX companies that have global exposure rather than just operating in one jurisdiction, like Canada for example? What is it you look for when considering investing in the resource sector – particularly companies listed on the TSX?
For all companies at which we look, whether listed on the TSX or elsewhere, Queen’s Road Capital has an unrelenting focus on the quality of the orebody. We are commodity agnostic, as well as stage of development agnostic, which gives us tremendous flexibility in searching out investment opportunities. The one area we are certainly not agnostic on is quality of orebody. On this point we have an unrelenting and persistent focus. One factor, however, which restricts our universe, is geopolitical risk. Although we have a global perspective and search for companies in which to invest listed on all exchanges around the world, including the TSX, we have a low tolerance for geopolitical risk and will only invest in companies where the orebody is in a sound jurisdiction within the context of the global mining industry.
For many on the TSX, the focus is on gold, but there is also a lot of exploration and development for renewables. Which commodities do you think are going to do well over the next year?
I am bullish on both uranium and gold in the coming year. This suggests that the disconnect between the equities and the commodity in both instances as mentioned earlier will ultimately be won by the equities. I expect copper will take a pause from its tremendous 2021 rally in the second half of the year. In the battery metals space, I am less concerned with predicting the future price of the current suite of metals getting all the attention and more interested in watching developments in the battery R&D space in order to predict which metals will win the longer-term battery materials war.