Goldman Sachs Sees Decade Long Bull Market For Metals

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Feb 09, 2022, 08:00 ET

FN Media Group Presents Oilprice.com Market Commentary

LONDON, Feb. 9, 2022 /PRNewswire/ -- Commodity stocks were some of the top performers in 2021, but the best is yet to come …Those commodities price gains we saw in 2021 weren't a one-off. Mentioned in today's commentary includes: Kirkland Lake Gold Ltd. (NYSE: KL), First Majestic Silver Corp. (NYSE: AG), Wheaton Precious Metals Corp. (NYSE: WPM), Compañía de Minas Buenaventura S.A.A. (NYSE: BVN), Harmony Gold Mining Company Limited (NYSE: HMY).

Goldman Sachs sees 2022 as the start of a metals supercycle that will last for decades. The biggest beneficiary of the commodities supercycle—across the board—is metals, says Goldman Sachs, with analyst Jeffrey Currie comparing metals to oil in the 2000s. And copper may be the new oil. Not only is it offering a brilliant potential set up for returns, but it's also emerging as what could be one of the best hedges against growing market volatility. Why? Because it's indispensable in global decarbonization strategies …And the squeeze is already being felt, alongside record-high prices that have seen base metals across the board double from a year ago.

There's no better time to be a junior explorer making a discovery of a basket of metals—better known to the major mining world as a coveted VMS (volcanogenic massive sulphide) deposit. It's a potential cornucopia of metals and the results so far suggest what could be a perfect alignment with Goldman Sach's supercycle.

The company is Starr Peak Mining Ltd. (STE.V; STRPF), which just reported its highest-grade VMS intercepts yet at its NewMetal property in Quebec's Abitibi Greenstone Belt, showing 8.98% zinc over 9.85 meters and 1.28% copper over 7.2 meters. This is all happening just a kilometer west of the historic producing Normetal mine, which has to date produced over 10 million tons of copper, zinc, gold, and silver.

Three drill holes have breathed even more excitement into this play—especially given the timing—with the highest grades so far added to the potential VMS allure:

Upper Zone (above 400 meters, vertically): STE-21-73: 5.90 m of 6.04% Zinc Equivalent
Deep Zone (below 400 meters, vertically): STE-21-82-W1: 9.85 m of 8.98% Zinc Equivalent, including 0.82% of copper
Deep Zone (below 400 meters, vertically): STE-21-81: 7.20 m of 5.14% Zinc Equivalent, including 1.28% of copper

We think that's excellent results for mid-January, with Starr Peak (STE.V; STRPF) already back to drilling … now targeting the Deep Zone below 600 meters.

A second drill will target the 4-kilometer prolific Normetmar-Normetal lithological contact on Starr Peak's property … the northern half of the Newmetal play is gearing up for drill-testing for gold targets.

The Supercycle Basket

VMS deposits are outstanding sources of mineralization. They're also major sources of copper and zinc. They also contain significant volumes of gold and silver. As it stands, VMS deposits account for around 22% of the global production of zinc and just 6% of the world's copper production. For now, just over 2% of gold comes from VMS deposits.

The rarity of these ultra-rich VMS deposits is what makes them so coveted by major miners. Not only are they among the best sources of mineralization in the world, but they are also known for extraordinary production potential and higher-than-average grading.

When Starr Peak (STE.V; STRPF) set out on the acquisition trail in 2019, it was only looking for gold. That's why it scooped up the property adjacent to Amex Exploration's big discovery. But its maiden drill program ended up finding more than gold, with indications of what could be a major VMS deposit.

And we're just getting started here. This is a huge land package that not only includes property right next to the Amex discovery but also the past-producing mine and three other prospective gold plays.

With its highest grade results already in, now it's about proving up possible tonnage and the commercial potential of this play. Proving up a VMS target that any big miner would love to get its hands on is the ultimate goal for a company in Starr Peak's position. We think this is the perfect setup for a VMS deposit, particularly for one that indicates high-grade copper.

H1 2021 saw copper undergo a huge rally on post-lockdown global economic recovery and a global push for decarbonization that shows signs of letting up. In fact, copper topped $10,000 per ton last spring. It hadn't done that in a decade.

H2 2021 saw copper rally yet again on an energy crisis that affected the global supply of the base metal. Q3 saw European copper inventories drop by nearly 90%, putting them at their lowest in nearly five decades.

As Goldman Sachs notes, we're just getting started here. Even if producers double their production they won't satisfy demand. That makes Starr Peak's fully-funded status, plus its superstar team, which includes the man behind the Amex Exploration discovery … on track to be one of our top picks for early-in investors looking to get in through the back door of the commodity supercycle.

And with the drill bit already back in the ground for more exploration, Starr Peak (STE.V; STRPF) is aiming to prove up a VMS discovery that could lead to what every junior miner covets … and that every early-in investor gets rewarded for.

Other Miners Looking To Capitalize On The Commodity Boom

Kirkland Lake Gold (KL) is an international mining company with a strong presence in Canada. It has been operating since 1983, and currently employs well over 1000 people. Their mission statement is to become one of the world's premier mid-tier producers of gold by delivering superior value for shareholders and stakeholders while responsibly advancing sustainable development. Kirkland Lake produces gold at low production costs and offers investors the opportunity to participate in the growth of their company through its dividend reinvestment plan (DRIP).

Kinross is another one of Toronto's finest gold miners. Though not quite as established as Barrick or Newmont, Kirkland is no stranger to striking headline grabbing deals in the industry. In fact, just recently, Kirkland and Newmont signed a $75 million exploration deal that could wind up being a game-changer for the industry. The two companies have agreed to split the cost 50/50 over five years with each company investing $15 million every year into joint projects between both companies for exploration purposes only - at this point it seems like a win.

Though First Majestic Silver (AG) is a silver mining company committed to responsibly meeting the world's growing need for minerals. First Majestic is the only primary silver producer in North America and one of the largest in the world. The Company owns six operating mines, four development projects, and has exploration properties across Canada, Mexico, Turkey and Peru. In addition to being a precious metals miner with an eye on production growth through new mine developments, First Majestic is also proud to be a gold producer as well as a major supplier of copper cathode produced at its Cerro Grande project located near Rosario City in northern Mexico.

While its primary focus remains on silver mining, it does hold a number of gold assets, as well. Additionally, silver tends to follow gold's lead when wider markets begin to look shaky. And with analysts sounding the alarms of a global economic slowdown, both metals are likely to regain popularity among investors.

Harmony Gold (HMY) is a gold mining and exploration company. Harmony's principal business activities are the extraction, processing and sale of gold from its mines in South Africa and Papua New Guinea. Harmony has produced more than 20 million ounces of gold since it was established in 1977. The Company also produces copper, uranium and other by-products such as silver and indium through its subsidiary Hutton Mining Services Ltd., which operates a number of mines around the world including the Lady Annie Mine complex in Tasmania, Australia.

Harmony Gold is another South African miner which has exploded onto the radars of investors this year. Though it's only the third-largest miner in the country, it has made some stellar moves in the marketplace. Domestically, it has nine underground mines in the resource-rich Witwatersrand Basin and one open-pit mine in the Kraaipan Greenstone Belt. It also has a major joint-venture with Newcrest Mining in Papua New Guinea.

Wheaton Precious Metals Corp. (WPM) is a company with its hands in operations all around the world. As one of the largest 'streaming' companies on the planet, Wheaton has agreements with 19 operating mines and 9 projects still in development. Its unique business model allows it to leverage price increases in the precious metals sector, as well as provide a quality dividend yield for its investors.

The Company's strategy includes maintaining an inventory of high-quality investments at all times, which enables Wheaton to take advantage of market opportunities when they arise while providing security if prices decline or production issues emerge. The Company also manages risk by utilizing hedging strategies that are designed to be effective regardless of whether gold prices rise or fall.

Randy Smallwood, Wheaton's President and Chief Executive Officer explained, "With their most recent successful construction of the Constancia mine in Peru, the Hudbay team has proven themselves to be strong and responsible mine developers, and we are excited about the same team moving this project into production. Rosemont is an ideal fit for Wheaton's portfolio of high-quality assets, and when it is in production, should add well over fifty thousand gold equivalent ounces to our already growing production profile."

It's rare to see miners from outside of North America on the New York Stock Exchange, but Compania de Minas Buenaventura (BVN) is an exception. Minas Buenaventura is a mining company that operates in Peru and Chile. It has been listed on the New York Stock Exchange since 1996 and is currently valued at $2.6 billion. The company was founded in 1993 by Peruvian businessman Julio Ponce Lerou, who wanted to provide employment for his countrymen after the 1990s economic crisis. The company provides much-needed jobs to its citizens while also extracting raw materials like copper, gold, silver, zinc and lead from mines located in Peru and Chile.

Minas Buenaventure is exposed to six different mining properties around the globe which bring in an estimated 945,000 ounces of gold every year. But that's not all its got going for it. It is also has exposure to a number of silver mines which produce as much as 26.5 million ounces per year, and tens of thousands of metric tons of industrial metals such as zinc, lead and copper from its domestic mines.

By. Michael Kern

**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**

Forward-Looking Statements

This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that prices for gold, silver, copper, zinc and other base metals will retain their value in future as currently expected, or could continue to increase due to global demand and political reasons; that Starr Peak can fulfill all its obligations to acquire its Quebec properties; that Starr Peak's property can continue to achieve drilling and mining success for gold and other metals; that historical geological information and estimations will prove to be accurate or at least very indicative; that high-grade targets exist; that Starr Peak will be able to carry out its business plans, including future exploration and drilling programs; that the preliminary drilling results will be confirmed as further exploration continues; that the lab results from Starr Peak's initial exploration program will confirm evidence of a significant VMS deposit; that Starr Peak's exploration results will gain the attention and interest of larger mining companies and investors; that Starr Peak's exploration results will continue to show promising results justifying ongoing exploration and possible development efforts. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that politics don't have nearly the strong effect on gold and other base metal prices as expected; that demand for base metals may not continue to increase; that the Company may not complete all its announced mineral property purchases for various reasons; that the Company may not be able to finance its intended drilling and exploration programs; Starr Peak may not raise sufficient funds to carry out its business plans; that geological interpretations and technological results based on current data may change with more detailed information or testing; that the lab results from Starr Peak's initial exploration program may not support evidence of a significant VMS deposit; that the preliminary drilling results may not be confirmed during further exploration efforts; that Starr Peak will fail to gain the attention and interest of other mining companies and investors; that Starr Peak's exploration results may fail to find additional promising results justifying ongoing exploration and/or development efforts; and despite promising results from drilling and exploration, there may be no commercially viable minerals or ore on Starr Peak's property. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.

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