Within the past several years, commodity prices reached a 50-year low relative to equity valuations (https://ibn.fm/QrRMU). Historically, such lows in the commodity-to-equity ratio have marked the onset of new commodity supercycles—prolonged periods of sustained growth in raw material prices—and we’ve clearly seen the markets shifting with gold hitting all-time highs throughout much of this year. As global economic conditions evolve, commodities have been re-emerging as an important consideration when reconstructing investment portfolios.
The last major commodity supercycle (1996–2011) was fueled by the industrialization of emerging economies like China, India and Brazil. Today, a combination of inflationary pressures, supply chain disruptions, and the global shift toward renewable energy is creating the conditions for what appears to be the next major cycle. This backdrop presents a compelling case for commodities as a hedge against inflation and a source of value in an otherwise uncertain economic environment.
What Drives a Commodity Supercycle?
Commodity supercycles share three defining characteristics:
- Surging Demand: Structural shifts, such as urbanization or technological revolutions, create prolonged demand for raw materials.
- Supply Constraints: Delays in bringing new projects online due to high capital costs and regulatory hurdles lead to prolonged supply shortages.
- Rising Prices: A mismatch between supply and demand drives prices significantly above long-term averages.
Today’s potential supercycle is being shaped by the global energy transition and advancements in technology. Metals like copper and silver are essential for renewable energy, electric vehicles, AI data centers, and energy storage systems. Demand for these critical materials is soaring, even as the mining sector grapples with underinvestment and geopolitical challenges that have constrained supply.
Commodities and Equity Markets: A Historic Divergence
The relationship between commodities and equity markets has historically been countercyclical. For example, in the 1970s, soaring oil prices coincided with a sharp decline in stock valuations. Conversely, the bull market of the 2000s saw equity strength dampen commodity momentum, until the 2008 financial crisis reset the balance.
In the current environment, this divergence is once again becoming apparent. Rising commodity prices—particularly in metals critical to green energy—are creating opportunities for investors in mining stocks, even as broader equity markets face potential headwinds from inflation and geopolitical risks.
McEwen Mining: Well-Positioned for the Next Commodity Cycle
With metal prices climbing and demand for resources surging, companies with diversified portfolios and strong fundamentals are emerging as key players in this evolving landscape.
McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) stands out as a compelling example of a company poised to navigate and benefit from the challenges and opportunities of the current market. By leveraging its rich asset base and focus on growth, the company provides insight into how mining firms are preparing to capitalize on this pivotal moment.
McEwen Mining: Positioned for Growth in Precious Metals and Copper Markets
The company’s management team has carved a distinctive path in the mining industry as a gold and silver producer with operations spanning multiple jurisdictions. Beyond its robust portfolio of precious metal assets, the company holds a 46.4% stake in McEwen Copper, the developer of the Los Azules project in Argentina—a large, advanced-stage copper deposit poised to benefit from the global push toward electrification and green technologies.
Under the leadership of Rob McEwen, the company’s Chairman and Founder, McEwen Mining is firmly aligned with shareholder interests. McEwen has personally invested $225 million into the company and takes an annual salary of just $1, underscoring his commitment to driving sustainable growth and maximizing shareholder returns.
Financial Momentum in Q3 2024
The company’s Q3 2024 results highlight a period of transformation (https://ibn.fm/lzJl7). Revenues rose by 36% year-over-year to $52.3 million, driven by higher gold prices and increased production. The average realized gold price surged to $2,499 per ounce, significantly above the prior year’s $1,920 per ounce. This performance translated to a remarkable 268% increase in gross profit, which reached $13.8 million.
Operational Progression
Recent exploration at the Grey Fox deposit, part of the Fox Complex in Canada, has yielded promising results, including high-grade drill intercepts (https://ibn.fm/zTM7s). Geological investigations demonstrate similarities between the Grey Fox Deposit and the Hishikari Gold Mine, which is one of the richest gold mines in the world.
In a press release announcing the results, Rob stated, “Firstly, our team is focused on drilling to add gold ounces into our production pipeline. Secondly, we are impressed by the depth potential. There are two styles of gold mineralization, epithermal veining and orogenic lenses, both gold-rich at the top of the systems. Based on our past and recent drilling, it appears that the Fox Complex has the opportunity to expand its production profile, and the depth potential is still wide open.”
Strategic Developments Fueling Growth
A significant highlight is the progress at the Los Azules copper project. A recent $56 million private placement, including contributions from Rio Tinto’s Nuton (https://ibn.fm/Zyi0I), positions the project for its next development phase. In fact, McEwen Copper just announced the approval of the Environmental Impact Assessment (“EIA”) and is now advancing towards publishing a definitive feasibility study, expected in the first half of 2025, with the potential start of construction as early as 2026 (https://ibn.fm/TQ7oi).
It’s also worth noting the company’s recent acquisition of Timberline Resources as it adds three promising Nevada properties, including the Eureka property with a measured and indicated oxide gold resource of 423,000 ounces (https://ibn.fm/fpWSh). We remain attentive to the company’s progress in Nevada and look forward to monitoring its developments as they unfold.
The Road Ahead
As McEwen Mining continues to advance its strategic initiatives, the company is well-positioned to capitalize on the emerging trends driving the next commodity supercycle. With a diversified asset base that spans both precious metals and critical copper resources, McEwen Mining is positioned to benefit from the growing demand for metals that are essential for the global transition to renewable energy. The company’s operational resilience and ongoing exploration efforts lay the groundwork for sustained growth.
For more information, visit the company’s website at www.McEwenMining.com.
NOTE TO INVESTORS: The latest news and updates relating to MUX are available in the company’s newsroom at http://ibn.fm/MUX
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