Commodities for Monday, November 18, 2025

Key Concepts

• Commodities Market: The overall discussion revolves around various commodities, including oil, gold, base metals (copper, nickel), soybeans, aluminum, and uranium.
• Geopolitical Impact on Commodities: Events like the Russian drone strike on an export hub and China's soybean purchases highlight how international relations and conflicts influence commodity prices and supply.
• Investment Strategies: The transcript touches upon diversification into gold as a hedge against stock and bond portfolio risks, and the potential for IPOs to unlock value in specific commodity operations.
• Critical Minerals: The importance of critical minerals for a future-focused economy is emphasized, particularly in the context of electric vehicles and defense.
• Supply Chain Dynamics: Discussions on aluminum scrap, Chinese dominance in nickel supply, and the challenges of restarting uranium mines underscore the complexities of global supply chains.
• Activist Investing: Elliott Management's stake in Barrick Mining signifies the influence of activist investors in demanding changes and potentially restructuring companies.
• Mining Operations and Economics: Detailed insights are provided into the operational aspects, cost structures, and future potential of base metal and uranium mines.

Energy Complex and Oil

The Russian export hub has resumed loadings after a Ukrainian drone and missile strike. Counterintuitively, this event, which might be expected to be bearish for oil by easing Russian crude flow, has not significantly impacted crude prices, which are holding their own. The past year has been described as a "miserable story" for oil prices, though this is beneficial for miners by reducing their diesel costs, a significant expense for large mining operations.

Gold Market Dynamics

Gold reached a record high of almost $4,400 US dollars per ounce. Typically, a strong US dollar tends to bring gold prices down, as the commodity is denominated in USD. However, Goldman Sachs views the recent weakness in gold as a temporary "blip" and forecasts prices to reach $4,900 by the end of 2026, representing a potential 21% gain. Lena Thomas suggests that private investors are diversifying into gold as a hedge against risks in their stock and bond portfolios, which could further boost gold prices.

Teck Resources Takeover and Canadian Industry Policy

Industry Minister Mélanie Joly has expressed dissatisfaction with Anglo American's pledges regarding its planned takeover of Teck Resources, stating that Canada should benefit more from the deal. Ottawa's objective is to retain globally competitive Canadian companies with significant headquarters in Canada. A key sticking point in the decision-making process, which is expected soon, is Ottawa's insistence that Anglo American move its official domicile and primary stock listing to Canada, a demand the company has reportedly resisted.

Agricultural Commodities: Soybeans

China has significantly increased its purchases of American soybeans, halting them for several months during a trade standoff. The U.S. Department of Agriculture reports that China will buy nearly 800,000 tonnes of soybeans for the 2025-2026 marketing year, marking the largest daily purchase in two years. This development has boosted optimism among U.S. soybean farmers, who have been heavily impacted by the trade dispute, as China is a major customer. Argentina and Brazil have been stepping in to supply the market in the interim.

Base Metals and Vale's Strategy

The TSX Index of base metal stocks has seen a 26% increase this year, driven by interest in copper and nickel as key components for an electricity-focused global economy. The head of Vale's Base Metals unit is preparing the operation for a potential Initial Public Offering (IPO) by 2027.

Vale Base Metals: Potential IPO and Value Proposition

Shawn Ashmore, heading Vale's Base Metals unit, discussed the possibility of an IPO or a spin-off to shareholders. He believes the unit is an "underappreciated, unique platform with huge potential." The strategy involves showcasing the growth potential in Brazil and other regions on a vertically integrated global platform, especially during a time of critical mineral demand. This could allow the business to capture a "cost of capital arbitrage" between a diversified company like Vale and a pure-play entity.

Vale's Current Structure and Future Focus

Currently, Vale's profits are predominantly derived from iron ore, with nickel and copper contributing less significantly. Ashmore's thesis is that the value of the base metals business is currently "buried within Vale" and not fully visible to the market. The base metals operations have a long history, with Sudbury being operational since 1886 and considered an original critical minerals story. Vale's operations in Voisey's Bay and Thompson employ 7,200 Canadians and have historically supplied a significant portion of high-purity nickel.

Strategic Advantages and Growth Plans

Vale's base metals operations are positioned to benefit from the global need for secure supply chains, especially as China dominates nickel supply. The company supplies 60% of high-purity nickel to the aerospace and defense sectors. The strategy is to lower the cost curve for these operations, making them globally competitive.

• Nickel: The focus is on making the Canadian endowment robust and globally competitive, especially given oversupply from Indonesia which has put more than half the cost curve underwater. Sudbury's operations are being revitalized, with investments to increase capacity and compete globally.
• Copper: Vale aims to at least double its current copper production of approximately 350,000 tonnes per annum, primarily in Brazil, over the next decade. This expansion is expected to be low capital intensity. Projects like Bacaba, with a capital intensity of less than $5,000 per tonne, are planned for around 2028, followed by other "hub and spoke" opportunities with lower capital intensity and risk compared to massive greenfield projects. This approach aims to avoid the historical challenges of bringing on new copper supply, which has often disappointed market expectations.

Operational Strengths and Environmental Commitments

Vale's operations benefit from low-altitude infrastructure, a dedicated workforce, and proximity to key markets. In Brazil, the company protects 2 million hectares of rainforest as part of its regional commitments.

Shawn Ashmore's Background and Vision

Ashmore, originally from South Africa, has a diverse background, including roles as CFO of Barrick and at Xstrata. He later co-founded a gold royalty company, Triple Flag, which grew to a $9 billion market cap. He was drawn back to Vale to unlock the potential of its base metals business, aiming to create another "North American champion."

Challenges and Opportunities for Vale Base Metals

Historically, the base metals operations have been overshadowed by Vale's premier iron ore mines, which receive priority for capital allocation. The base metals business, largely underground rather than open-pit, involves extensive infrastructure (mills, concentrators, smelters, refineries) that aligns with government discussions on critical minerals. The key to unlocking value is "focus." Research reports have identified at least $30 billion in value, and Saudi Arabia invested $2.5 billion for a 10% stake in Vale Base Metals. The current efforts are focused on reliable production, bringing focus, and leveraging the company's endowment.

In Sudbury, Vale operates five mines, a refinery, and a smelter, and is investing to increase capacity to compete globally. The company is working to ensure its Canadian copper and nickel operations remain competitive, especially as some Australian and New Caledonian operations have faced challenges due to oversupply from Indonesia.

Barrick Mining and Activist Investor Interest

Elliott Management has reportedly taken a stake in Barrick Mining, valued at approximately $700 million US dollars. Elliott is known for being an aggressive activist shareholder seeking to drive changes within companies.

Barrick's Recent Performance and Challenges

Barrick's shares have struggled to keep pace with the price of gold over the past year, particularly in the first half, due to operational setbacks, including cost overruns at North American assets and the seizure of a major mine in Mali by the government.

Potential Restructuring and Geographical Focus

Following the departure of CEO Mark Bristow in September, Barrick is reportedly exploring scenarios to split into two entities: one focused on its well-performing North American assets (Nevada and the Dominican Republic) and another for its international assets. This move aligns with a trend in the gold mining industry where companies with more concentrated geographies, like Agnico Eagle (primarily in Quebec), have performed well. Barrick's sprawling portfolio has been hampered by operations in various locations, and a regional consolidation could improve performance.

Uranium Sector and Denison Mines

Denison Mines is developing a significant potential uranium mine in Saskatchewan, the Phoenix Project at its Wheeler River property, and is close to federal and provincial permitting. An investment decision is expected in early 2026, potentially making it Canada's newest mine and the first uranium mine in over a decade.

Denison's Acquisition and Strategic Partnership

Denison has acquired a company that is adjacent to its flagship Wheeler River property. This transaction involves a partnership with Skyharbour Resources, where Denison is purchasing an interest in newly created joint ventures (JVs) stemming from Skyharbour's consolidation of the Russell Lake property. Denison will have an option to increase its interest up to 70% in two of these JVs by deploying significant exploration spending.

Rationale for Joint Ventures and Exploration Strategy

The Russell Lake property is a large land package. Splitting it into four JVs with Skyharbour is intended to maximize attention and target discovery. Skyharbour will operate on multiple JVs, with Denison participating and operating on the Wheeler North JV. This strategy aims to leverage both teams' expertise and maximize joint exposure to discovery. Uranium deposits in Saskatchewan are rich but difficult to find due to their high grades and small footprints.

Uranium Market Outlook

David Cates, CEO of Denison Mines, describes the current sentiment in the uranium sector as the most positive he has seen in his nearly 20 years in the industry. Positive developments in global nuclear energy deployment are driven by clean energy goals and energy sovereignty, reducing reliance on potentially unfavorable nations.

On the supply side, the prolonged period of low prices has led to the shutdown of many mines. Restarting projects has been challenging, and there are few top-tier projects in the pipeline. Denison's Phoenix Project is an outlier with the potential to be one of the lowest-cost uranium mines globally. However, much of the new supply required to balance the market in the long run is in jurisdictions with low grades, high costs, and high risk, making it challenging for supply to meet growing demand.

Miscellaneous: Vegemite in Australian Prisons

A peculiar story is shared about Andrew McKechnie, a convicted murderer in Australia, suing the state government for being denied Vegemite in prison, claiming it violates his human rights and his right to enjoy his Australian culture. Vegemite is banned in Victorian prisons due to inmates smearing it on drug packages to deter sniffer dogs and claims that it could be used to brew alcohol ("prison hooch"). While there were past claims of remote Indigenous communities using Vegemite to brew alcohol, the former owner stated that the yeast is dead and it cannot be fermented. Vegemite is an iconic Australian product, found in an estimated 80% of households.