April eighth, two thousand twenty-six
《A ‘New’ World: On the Pricing of Mining and Resource Stocks》
《A “New” World: On the Pricing of Mining and Resource Stocks》
By: Ariston
X ｜
Preface: This article follows up on the earlier discussion of Hong Kong-listed stocks Going long on mining and resource stocks such as aluminum, magnesium, tungsten, tantalum, and rare earths...
There are two considerations in the repricing of critical minerals: commodity supply and demand, and the cost of capital.The market now faces a world where the cost of capital has been reset higher. Many questions have shifted from whether resources have value to who can still bring projects into production amid a higher cost of capital, slower permitting, and higher construction costs.
Figure: Supplementing The HALO Thematic in 《WEEKLY WRAP 260405》
Figure: 《WEEKLY WRAP 260405》
Take lithium ore as an example: several significant spodumene-related deals have emerged in recent weeks. Pilbara’s offtake agreement with Ganfeng included an 1 hundred million US dollar prepayment; Core Lithium secured financing to restart operations; Lithium Ionic signed a binding offtake agreement with a Chinese buyer; and Sigma eased liquidity concerns with offtake and financing. The spot market for spodumene has already tightened markedly.
Figure: Spodumene-related deals in the commercial market
To date, low-cost, near-production lithium projects in Brazil and Argentina remain relatively undervalued, and This logic is spreading from lithium to critical minerals more broadly, including rare earth resources.This reflects pricing power shifting toward low-cost assets with near-term cash flows and strategic characteristics. The question is that commodity prices are strengthening, yet the stock-market baskets have diverged so far:
Figure: Examples of some proxy baskets (daily charts, as of 260407)
Attributing the price divergence is quite complex. One possible explanation is that the market is now being driven more by geopolitics, oil prices, and central banks than by underlying micro-level fundamentals.Ever since we first began discussing the new hard-asset thesis, we have talked about how “AI trades are really capital-side trades,” and key rare-mining stocks sit precisely in the shovel-selling segment of AI. Power materials are part of this framework, as are rare earths through to magnetic materials, and mines through to magnets.
Chart: The Metals Company is discussing land options with local and state governments in Brownsville, Texas, hoping to build a refinery in the United States, specifically around the Gulf of Mexico. (Daily chart, as of 260407)
At the micro level, if you read a lot of bottom-up research, you can see a general pattern:The cost of debt, the cost of equity financing, borrowing costs in general, and even the operating costs of the projects themselves are all rising. Input costs are now so volatile that by the time most producers have just finished putting together their budgets, conditions may already have changed, forcing them to start over. And many projects can only push their development timelines further out if the cost of capital is not within a range acceptable to both management and shareholders.
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Another angle is munitions.
Chart: ITA (Daily chart, as of 260407)
In “WEEKLY WRAP260405,” we discussed potential pullback support for ITA.If munitions are being consumed at a high rate—and many of today’s munitions are actually drones—and drones rely on motors and permanent magnets, as well as batteries, then battery metals and magnet materials should benefit.
Chart: It is the scarce resources themselves that are being valued against oil
A group of rare-earth names in MP Materials has also shown Failed Breakout signals marking a bottom reversal:
Chart: MP (Daily chart, as of 260407)
Bromine producers are also a key link in the broader“war materials + electrification equipment”chain, alongside lithium and rare earths. Brominated flame retardants are widely used in military electronics, composites for aircraft, ships and vehicles, cables, military textiles, military enclosures, and other applications, providing fire protection in extreme environments and meeting stringent military standards, such as requirements for highly reliable fire protection. A fire in military equipment can have disastrous consequences, and brominated flame retardants are difficult to replace fully in these high-safety applications. In addition, some bromides have been used indirectly in chemical defense (for example, pyridostigmine bromide was used as a pretreatment drug for protection against nerve agents during the Gulf War). Bromine compounds are often listed as strategic items on export control lists.
Figure: Examples of some proxy baskets (daily charts, as of 260407)
If raw material and energy costs do not spiral completely out of control (the soft-landing path; see our previous Planet Notes for our assessment of this path—we do not agree with the scenario of disorderly increases in energy costs),Existing producers should see stronger demand, better prices, and higher profits. This should be a phase in which incumbent producers have a relative advantage.
Developers need to be considered on two levels. The first is the mine itself: projects that are already very close to production, have completed pilot testing, and are ramping up toward commercial output. Lithium Americas is a good example of this category:
Chart: LAC (Daily chart, as of 260407)
The second level is the ranking of development stages at the micro level. Later-stage projects, with permits largely in place, financing lined up, and mine startup not far off, are clearly at the front of the queue. Companies still relying on drilling to define their resources and that have not even made real progress on permitting must proactively push their timelines further out. As we have said, The government’s attention is being continually drawn away by geopolitics. Slower-moving players on the industry side will face a period of falling behind here.
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Against a backdrop in which government attention and the macro narrative are not as strong as they were three or four months ago, and capital is reallocating its attention elsewhere, the current correction from the market’s relatively high levels at 20%-30% provides, to some extent, a backdrop for long-term capital to buy the pullback, Most importantly, shifting is not the same as disappearing, and becoming more dispersed does not mean becoming unimportant.
We trade price, and over a given period of time, price can also be expressed by another word: attention.
In other words, what market participants see most of the time is essentially a discounting of time and sentiment, not a discounting of the price of the underlying commodity based on fundamentals of supply and demand.
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Finally, would a truce between the United States and China in key areas hurt the investment thesis? It certainly would, because many buyers are betting on a price surge over the next two or three years or a re-rating of net present value multiples. But from an industry perspective, will this theme disappear forever? The answer is just as certain: absolutely not. The questions we face today will still have to be answered by people tomorrow; they cannot be avoided.
For decades after the war ended, the world tried to build a long chain of globalization in which everyone would cooperate amicably over the long term. But the past few years have shown that people are still people, politicians are still politicians, and their ambitions still collide. So in the end, every country has to return to the most basic questions:
Can it feed itself, power itself, provide jobs for its people, and keep society under its rule running stably?
Image: Notes260407 “A Conversation: Trump in the Year 1980”
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Finally, even though trading has paused, it is still worth revisiting Zoltan’s earlier discussion of gold’s failure as a safe haven:
Investors who are counting on QE to narrow swap spreads have actually been looking in the wrong direction…
…because Releasing strategic petroleum reserves (SPR) and combining that with forward buybacks to increase crude oil supply is essentially a form of “physical QE.” Against this backdrop, I don’t think government intervention in the futures market would be a disaster; rather, it would be a smart move.。
The situation in the Middle East can deteriorate quickly, and it can improve just as quickly…
…which is inherently difficult to price. But I’ve noticed in conversations with clients that commodity-focused accounts are markedly more pessimistic than accounts trading interest rates and risk assets. Trump is demanding unconditional surrender, while Iran keeps adding conditions; this precisely means that progress is being blocked.
Risk assets still have considerable room to fall, while refined oil products still have room to rise. Gold has stopped rising…
…This is an important signal.
I turned bearish on gold on 1 month 21 day, and since then gold has had no clear trend—moving up and down, but staying broadly range-bound. We are relearning a fact we learned during the pandemic and then forgot:Unless flights resume and the world returns to normal, gold is not a liquid safe-haven asset at critical moments.Abaxx Technologies offers a solution. In 12 month last year, Abaxx completed its first digital credential pilot, demonstrating how physical gold in storage can be converted into a tradable, collateralizable asset to meet margin requirements for gold futures under existing market structures.
Gold “wrapped” by Abaxx is not the same as “naked gold”—its corresponding trading code is ABXX.How long the Strait of Hormuz (SoH) remains closed, and how severely the jet fuel shortage or surcharges worsen, could cause gold to trade at a discount in other regions.
There is another lesson about gold…
End of full text.
Used together, U.S. stocks, A-shares and Hong Kong stocks, and Commodity Planet cover some additional market details, with content that is continually being developed:
U.S. stocks:https://www.meridianresearch.app/home?product=us-strategies(Xingzhi)
A-shares and Hong Kong stocks:https://www.meridianresearch.app/home?product=asia-strategies(Harbor Dragon)
Commodities:https://www.meridianresearch.app/home?product=commodity-strategies(Earth's Core)
Note: All content in this article is for reference only, does not constitute investment advice, and is not a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for making decisions.