The 2019 Metals Outlook

Written by Gerardo Del Real
Posted December 23, 2018 at 7:00PM

2018 has been a challenging year for those of us who speculate in the junior resource space. But, despite one of the toughest years I’ve ever seen, there’s a lot to look forward to in 2019.

Earlier this year when everything was rosy, the overall indices and all cryptocurrencies were going straight up (where’d all the experts go?), and volatility was non-existent, I told you that volatility was on the way and would become a permanent part of the investing landscape.

Now I’m telling you that 2019 will be a breakout year for copper, uranium, and even gold.

Bloomberg recently reported that a third of capital spending by big miners is being allocated to copper.

Capex is a third of what it was in 2013.

Trade tensions between China and the United States took copper from a high in June to the $2.69/lb. level where it sits now.

I’ve said it several times: trade wars are not sustainable and I expect a breakthrough in negotiations in early 2019.

There is a lack of large-scale copper developments that can be brought online to replace depleting reserves and stockpiles on the London Metal Exchange are down nearly 30% month on month just off one-year lows.

COMEX open interest is at a two-year low and hedge funds have liquidated long — and short — positions, in essence going neutral into 2019.

Expect a deal with China. Expect an infrastructure deal and expect a copper price north of $3.20/lb. in 2019.

The juniors with exposure to copper have been hit with a combination of a crypto and cannabis bubble which soaked up speculative dollars earlier in the year, making the juniors first in line for tax-loss selling.

January is right around the corner and so are higher copper prices. I expect a bull market in copper that takes many by surprise in 2019. The juniors will soar.

Uranium is also primed for a breakout year and the start of a historic bull market in uranium companies.

Unlike copper, which is down nearly 17% this year, uranium is up over 30% from the 2018 low.

No one bothered to tell the juniors.

The juniors have not kept up and the disconnect presents one of the most compelling opportunities I’ve ever seen.

There are currently 454 nuclear power reactors in operation supplying 31 countries around the world, with 54 under construction, another 148 planned, and 337 proposed across Europe, India, the U.S., and China, according to the International Atomic Energy Agency.

Like copper, uranium is poised to benefit from the electrification of everything.

Global electricity demand is forecast to grow approximately 50% over the next two decades and I believe that to be a conservative estimate.

Japan has nearly 10% of the world’s reactors but restarts have been slow and most are still not operating.

China — the commodity elephant in the room — only generates 4% of its power from nuclear but has a target of 20% non-fossil fuel by 2030. That’s a lot of new reactors and pent-up demand will underpin prices for at least a decade.

The bottom line is we need a uranium price of $40-$60/lb. to restart idle mines and $60-$80/lb. to spur new construction.

Another driver — along with supply cuts — is the new holding companies and funds that have come into the market.

Yellow Cake raised over $200 million earlier this year to buy over 8 million pounds from Kazatomprom.

It can raise and buy $100 million worth of Yellow Cake each year for the next nine years. That’s millions of pounds that could potentially come out of the market.

The nearest-term catalyst and one that I believe will send shares of U.S.-based uranium development companies up is the Section 232 investigation.

That decision will force the U.S. utilities, who are the largest consumers of uranium globally, to finally step back into the market.

They’ve been idle waiting for a decision from President Trump.

That decision is imminent. The bull market that will accompany it will be violent and historic. Get positioned now.

We’ll talk gold next week. Have a great holiday.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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