Week 28 29
Let's Make the US Mining Great Again; Week 29 Shopping List
It’s time for shopping. Before discussing the new additions, I would like to share my thoughts on last week's highlight—I closed the largest position in my book, Northern Dynasty Minerals.
Northern Dynasty Minerals
At first glance, it seems that I exited too early, considering that the veto imposed by the EPA will most likely be lifted. Thus, the Pebble project will get the green light. Following the veto removal, the mine is set to begin production without any issues.
Mining is anything but an easy business, and whatever could go wrong will go wrong. More importantly, political influence works in the early stages of a mine's life, and Pebble is about to move on to the next stage of its development.
Once the veto is lifted, the harsh reality of mining sets in. Developing a mine takes more than ten years, from the first defined resources in the ground to the first copper ingots. Normally, it takes an average of 15 years.
Pebble is not at this stage; the mine's resources are broadly defined. However, there are still many steps to go before production begins. The next one is to define the reserves. For reference, let's look at Pierre Lasonde's curve, which shows the life cycle of a mine.
Pebble still has a long way to go. I assume that if there are no serious obstacles, be they financial, technical, or political, the mine will start operating in 5-7 years at the earliest.
The removal of the veto moves NAK from an event-driven idea with a political catalyst (Trump's election) to a classic mining story with a horizon of at least five years and project-level catalysts.
Let's not forget something else—commodities are cyclical, and the current bull market eventually will turn into a calamitous bear market. Pebble may start production right at the peak of the current cycle. Such stories are not an exception but a norm in mining.
My point is not to make NAK a bad investment, but rather to emphasize the qualitative change in the hypothesis. From a wager on a change in US policy, the idea has become a classic bet on the successful commissioning of Pebble. This means that the distribution of probabilities and risk reward is changing, which in turn requires a different approach and tools.
Talking about profit taking, I'd like to highlight one crucial aspect. We will always leave money on the table, no matter how much we believe otherwise. Attempts to target peaks and troughs end up comical at best, and often tragic. Massive gains can easily turn into ruinous losses. Bernard Baruch said it better than I can.
Mr. Baruch knows what he wants the market to give him, and if he gets it, he is out. Simple as that.
The NAK story has developed according to my scenario, and the company's share price reached the target. I got what I wanted from the market (412% ROI at a $0.39 average purchase price and $2.00 exit price), so I closed the position.
Now let’s move on to next week’s shopping list.
Critical minerals
As a major consumer of critical minerals, the US is overly dependent on China. Since taking office, Trump has taken steps to reduce this dependence. A few days ago, the Pentagon announced a partnership with MP Materials, which includes direct financing.
In the coming months, I expect other companies to be included in similar programs. More antimony, tungsten, and REEs projects will be supported in every possible way.