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When we analyze our data, one of the most striking sectors is small cap gold. You would think that gold has lifted all boats, but for pure exploration companies doing early stage grassroots prospecting, gold is a horrible bedfellow.
There is a limited number of dollars that can be used to fund early stage exploration. Currently there are at least 600 small cap gold companies each chasing enough money to sink a few holes and hopefully find the next big thing.
Too many CEOs are convinced that they are the Rock of Gibraltar. The sun rises because they wake up, their projects are so good that no one needs to market them, and anyone who doesn’t understand what they’re doing is an idiot at best and an active conspirator to steal the company at worst.
Many of these CEOs are excellent exploration geologists. Their confidence and ability result in extraordinary finds and world-class deposits. However, when it is time to manage the investor relations, the TSX, the books, and the interpersonal relationships that drive the mining world, they fail to place the right people around them who know how to handle these things.
Technology is a driver of demand for raw materials. A new battery design, a new electric motor, or a change in the composition of steel will all drive demand for one commodity versus another.
It is important to remember that some changes in demand are structural and not price sensitive. With others, demand will be engineered into oblivion in the next product cycle if commodity prices shift.
Significant amounts of copper demand cannot be replaced. However, when copper prices started to increase, copper plumbing disappeared. We have cheaper solutions that are quicker to build, such as plastic.
