Could This Become The Biggest Commodity Squeeze Of All Time

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Mar 16, 2022, 08:00 ET

LONDON, March 16, 2022 /PRNewswire/ -- Metals prices aren't just breaking records, they're disrupting entire exchanges. On Wednesday, three-month contract prices for nickel more than doubled in a matter of hours to over $100,000 per ton, causing the London Metal Exchange (LME) to suspend trading over what it called an "unprecedented" event. Mentioned in today's commentary includes: Yamana Gold Inc. (NYSE: AUY), Agnico Eagle Mines Limited (NYSE: AEM), Sociedad Química y Minera de Chile S.A. (NYSE: SQM), Compañía de Minas Buenaventura S.A.A. (NYSE: BVN), First Majestic Silver Corp. (NYSE: AG).

Base metals across the board have continued to rise. Copper prices hit an all-time high last week, and Zinc has consistently broken records this month. Aluminum prices on the LME have increased by another 5% on Wednesday alone, on fears of a supply disruption. And gold has hit record highs of its own on high inflation and geopolitical uncertainty. Some analysts even expect gold prices to triple over the next five years.

That could be the perfect setup for North American explorers …And one junior miner is looking to capitalize on the supply squeeze and rising prices for a number of those metals that have been disrupting exchanges right now.

Starr Peak Mining Ltd. (STE.V ; STRPF), which has made a number of extremely well-timed acquisitions over the past few years, set out to find gold but ended up discovering an entire basket of some of these same base metals that are shocking the commodities exchanges into suspensions.

Overnight, Starr Peak has gone from being an exciting gold and base metal exploration play to being something even bigger: A potentially critical element in the future of North America's supply chain security.

A Maiden Drill That Plays To Surging Metals Markets?

After scooping up prime gold acreage next to a discovery by Amex Exploration that at one point rewarded early investors with up to 7,000% returns, Starr Peak was hoping only to replicate Amex's success, which may be exactly why an Amex executive jumped on with Starr Peak as an advisor. They were hoping for it, too. But then Starr Peak surprised many of us with much more than a gold discovery.

On its maiden drill program at its NewMétal property in Quebec's Abitibi Greenstone Belt, Starr Peak reported back with indications of a VMS (volcanogenic massive sulphide) discovery containing multiple base metals, including zinc, copper, silver, and gold.

A VMS deposit can help turn a junior gold miner into a company worth multiple times its market valuation because they're rare finds that are found in clusters of deposits, and they boast longer-term production potential. Now, with base metals prices soaring on supply chain security, a VMS discovery would not just be timely–it would be critical.

In the second round of results on January 11th, Starr Peak reported its best VMS intercepts yet, of 8.98% zinc equivalent over 9.85 meters and 1.28% copper over 7.20 meters.

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

Drilling is ongoing, and Starr Peak secured a third rig in February for NewMétal, focusing on the priority VTEM anomalies on a projected extension of the Perron Eastern Gold Zone trend.

An Almost 100% Hit Rate So Far

Starr Peak (STE.V; STRPF) had almost a 100% hit rate on its reported drill hole targets, and each drill has led to further expansion of the drill program that started in May 2021.

We think this year could be even bigger, targeting the 4-kilometer prolific Normetmar-Normetal lithological contact on Starr Peak's property and with NewMétal also set to be drill-tested. And all of this is in one of Canada's most prolific gold and polymetallic venues–the Abitibi Greenstone Belt. They're also well-funded to keep drilling, with seven private placement deals raising approximately $15 million since 2020.

With supply chain disruptions now likely assured, it's the perfect time to be announcing solid results in a play that indicates a basketful of ultra-high-demand metals.

If Starr Peak can prove up a commercial VMS deposit, we think it could become the junior mining discovery of the decade, right at a time when the market is in "panic mode in terms of supply", as T-Commodity's Gianclaudio Torlizzi tells Mining.com. As giant automakers look to establish battery supply chains, Starr Peak could be one of our best picks for playing the base metals supply squeeze.

Miners Are Poised To Fare Well

Yamana Gold (AUY) is another one of the world's top gold and precious metals miners. The company has been producing gold for over 50 years and operates two mines: the Canadian Malartic mine in Canada and the Minera Florida mine in Chile. It also owns three other properties: Agua Rica, Tapada do Norte, and Caiena. One of Yamana's most notable mines is the Chapada mine in Brazil which has been operational since 2011.

In 2021, Yamana signed a deal with industry giants Glencore and Goldcorp to develop and operate another Argentinian project, the Agua Rica. Initial analysis suggests the potential for a mine life in excess of 25 years at average annual production of approximately 236,000 tonnes (520 million pounds) of copper-equivalent metal, including the contributions of gold, molybdenum, and silver, for the first 10 years of operation.

In February alone, shares of Yamana Gold jumped by 20% on its solid financials and growing geopolitical and economic instability. And now, as investors pile into safe haven resources, miners with strong financials and ambitious plans to expand, like Yamana Gold, have some major upside potential in the coming months.

Agnico Eagle Mines Limited (TSX:AEM) (NYSE:AEM) which just recently merged with Kirkland Lake Gold (KL) is yet another Canadian gold miner. Kirkland has been in operation for over half a century. They are one of the world's largest producers of gold, with their mines located throughout Canada. The company focuses on using sustainable practices to ensure they are leaving behind an environment that can be enjoyed by generations to come.

While it doesn't hold the same clout 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.

Kirkland has bucked the trend in gold miner returns this year, with its share price falling by 26% since January. That doesn't mean it is still not a force to be reckoned with, however. Supply chain issues have proven to be a major thorn in Kirkland's side, but that won't last forever.

Sociedad Química y Minera de Chile (SQM) is a Chilean company that produces more than 55 minerals, including lithium, iodine, potassium nitrate and copper. The company's headquarters are located on Avenida Kennedy, Santiago which was once an industrial area of the city with as many of 300 factories built there during its heyday between 1880 to 1930s.

Sociedad Química y Minera sees the lithium industry growing at around 20 percent per year in the long term, supported by rising EV sales and emission reduction goals from China to the United States. And as one of the largest lithium miners in the Western hemisphere, SQM is well positioned to take advantage of the boom.

Year-to-date, Sociedad Quimica y Minera has fared a bit better than one of its biggest competitors, Lithium Americas. Since January, SQM has seen its share price rise by 38%, and if it continues to post solid financials, it could climb even higher. Analysts are already raising their estimates for SQM, and this year's just getting started.

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.

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. Tom Kool

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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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