Cartels' growing impact on mining in South America, ft MINING[dot]com's Cecilia Jamasmie

Key Concepts

• Energy Security: The strategic push by nations to secure energy supplies (hydro, nuclear, renewables) amidst global geopolitical instability.
• Pot Freeze: A critical failure in aluminum smelting where power loss causes molten metal to solidify within the reduction cells, requiring 6–12 months to restore.
• Critical Minerals: Rare earth elements (REEs), copper, and lithium, which are essential for the energy transition and AI infrastructure.
• Resource Nationalism: The trend of governments (e.g., Ghana, Bolivia, Chile) asserting greater control over natural resources and demanding local ownership.
• Stagflation: An economic condition characterized by slow growth and high inflation, a concern for the metals market due to rising energy costs.
• Ionic Absorption Clays & Carbonatites: Geological host rocks for rare earth elements.

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1. Global Energy and Geopolitical Shifts

• China’s Strategy: President Xi Jinping has called for an accelerated "new energy system" to ensure security. China is balancing a pragmatic approach: maintaining coal as a "reliability backbone" while aggressively expanding wind, solar, and nuclear power.
• Middle East Conflict: The war in the Persian Gulf has caused significant supply chain shocks, particularly in aluminum and sulfur.
• Aluminum Crisis: The Emirates Global Aluminum (EGA) smelter in Abu Dhabi was struck by missiles, leading to a "pot freeze." Restoration is estimated to take up to 12 months, tightening global supply and increasing long-term price risks.

2. Mining Industry Challenges and Developments

• Copper Supply Constraints: Major projects are facing setbacks. Ivanhoe Mines slashed production guidance for the Kamoa-Kakula complex in the DRC due to operational challenges and underground development delays. Panama is moving to process stockpiled ore at the shuttered Cobre Panama mine, a potential first step toward reopening.
• Sulfur Shortage: A record-setting rally in sulfur prices (up 20–66% in various regions) is squeezing nickel and copper producers, as sulfur is a critical reagent in metal refining.
• Rare Earths & AI: The US is aggressively funding domestic and allied rare earth projects (e.g., $1.6B for USA Rare Earth, $565M for Brazil’s Serra Verde) to reduce reliance on Chinese supply chains. However, experts question the commercial readiness of these early-stage companies.

3. Regional Focus: Latin America

Cecilia Jamasmi (Mining.com) highlights a geopolitical shift in Latin America:

• Political Realignment: Countries are shifting from left-leaning governments to more market-friendly, right-leaning administrations (e.g., Argentina, Chile) driven by public frustration over crime and economic instability.
• Bolivia: Despite holding 20–25% of the world’s lithium, the country struggles with "two-speed" development—traditional silver/zinc mining remains stable, while lithium remains underdeveloped due to high magnesium content in brines, lack of infrastructure, and political uncertainty.
• Chile: The new administration is pushing for faster permitting to regain its status as a top lithium producer. However, the country faces a "cursed" 10-year permitting process that drives investment toward more flexible jurisdictions like Argentina.
• Colombia: Illegal gold mining has surpassed drug trafficking in revenue, creating a security crisis that deters large-scale foreign investment despite the country's significant copper and gold potential.

4. Corporate Spotlight: Appia Rare Earths and Uranium

• Strategy: Appia is focused on high-grade uranium in the Athabasca Basin (Canada) and rare earths in Goiás, Brazil.
• Key Projects:
  • Alces Lake (Saskatchewan): 100% owned, targeting high-grade monazite-hosted rare earths (neodymium, praseodymium, terbium) and gallium.
  • Brazil Project: A joint venture with Ultra Rare Earths, utilizing both ionic absorption clays and carbonatite deposits.
• Market Position: The company argues it is significantly undervalued (market cap ~$28M) relative to its peers and the strategic importance of its assets in the current energy transition.

5. Notable Quotes

• President Xi Jinping: "The party central committee has gained a profound grasp of global energy development trends and made major decisions by advancing the new energy security strategy in depth."
• Cecilia Jamasmi: "Investors are not just watching who wins... they're watching whether the government that is coming up can actually deliver on the promises of stability, permitting, infrastructure, and... security."
• Scott Gates (Awake Window and Door): "The tariffs haven't given us a pricing advantage. Their prices went up and our prices went up."

6. Synthesis and Conclusion

The global mining sector is currently in a state of "treading water" while navigating a complex web of geopolitical conflict, energy price volatility, and resource nationalism. The primary takeaway is that security of supply has superseded cost-efficiency as the dominant driver of market behavior. Whether it is the US funding unproven rare earth miners or China accelerating its domestic energy grid, the focus is on insulating national economies from the shocks of war and supply chain fragility. For investors, the landscape is increasingly defined by the ability of mining jurisdictions to provide legal certainty and security, rather than just the presence of high-grade resources.