The 'Air Pocket' Risk: How Geopolitical Tensions Are Impacting Mining Operations | Neil Adshead

Key Concepts

• Safe Haven Asset: The traditional role of gold as a hedge against geopolitical instability and economic uncertainty.
• Net Profits Interest (NPI): A royalty interest where the holder receives a percentage of the net profits from a mining operation.
• Preliminary Economic Assessment (PEA): An early-stage study that provides a financial and technical snapshot of a potential mining project.
• All-In Sustaining Cost (AISC): A comprehensive metric used to measure the total cost of producing an ounce of gold, including mining, processing, and administrative expenses.
• Heap Leach Circuit: A cost-effective metallurgical process used to extract gold from low-grade ore by spraying a chemical solution over crushed rock.
• Tier One Jurisdiction: A mining-friendly region with stable legal frameworks, clear permitting processes, and established infrastructure.
• Use-it-or-lose-it Policy: Legislative measures designed to prevent companies from holding mineral concessions for long periods without conducting exploration.

1. Market Volatility and Gold’s Role

The discussion opened with the recent "metals price dump," highlighted by a $6.3 billion outflow from the GLD (SPDR Gold Shares) fund in March.

• The "Safe Haven" Paradox: Despite gold’s reputation as a hedge, it experienced a sell-off during the Iran conflict. Neil Adshead explains this as a liquidity event: when investors face margin calls or need to cover bills, gold is often the most liquid asset available to sell.
• Long-term Outlook: While short-term volatility is driven by geopolitical rhetoric, the long-term supply-demand fundamentals for commodities remain robust. Gold is expected to return to its role as an "insurance vehicle" once global tensions stabilize.

2. Barrick Gold: Operational and Legal Challenges

Barrick Gold faces significant headwinds, including security concerns and transparency issues.

• Reko Diq Project (Pakistan): Construction of the $9 billion copper-gold project has been paused due to rising separatist violence in Balochistan and regional aviation disruptions. First production is now delayed until at least 2029.
• Four Mile Discovery (Nevada): Revelations surfaced that Teck Resources holds a 10%–15% NPI on a portion of the Four Mile project. Adshead notes that Barrick’s failure to disclose this in their September 2025 PEA is unusual, though he suggests the royalty may not be financially significant for a decade due to high initial capital expenditures.
• Spin-out Strategy: Barrick is pursuing a spin-out of its North American assets. Adshead argues this is a parallel process that will proceed regardless of the security situation in Pakistan.

3. AngloGold Ashanti: The Success of "Arthur"

AngloGold Ashanti’s Arthur project in Nevada is cited as a model for successful exploration.

• Methodology: The project’s success is attributed to 12–13 years of persistence, aggressive drilling, and the strategic acquisition of smaller juniors (e.g., Corvus Gold).
• Technical Specs: The project targets 500,000 oz/year production at an AISC of $954/oz, utilizing conventional open-pit mining and heap leaching.
• Key Takeaway: "Good deposits aren't discovered; they are made." The project demonstrates that even in mature jurisdictions like Nevada, significant discoveries are possible with long-term capital commitment.

4. The Rise of Zijin Mining

Zijin Mining has rapidly ascended to become the world’s sixth-largest gold producer and fifth-largest copper producer.

• Strategy: Their growth is driven by an aggressive, acquisition-heavy strategy.
• Global Reach: Unlike many Western firms that prioritize "Tier One" jurisdictions, Zijin is willing to operate in higher-risk, "Tier Two/Three" regions, allowing them to secure assets with less competition.

5. Junior Mining and Permitting

The conversation highlighted the shifting landscape for junior miners, specifically Liberty Gold and Heliostar Metals.

• Liberty Gold: By divesting non-core assets (Turkey, Utah), Liberty is focusing on the Black Pine project in Idaho. The project’s inclusion in the "FAST-41" permitting program is a positive indicator for US-based development.
• Permitting Hurdles: Adshead emphasizes that the biggest deterrent to exploration is the time required to secure permits. He notes that while the US is notoriously slow, some West African nations (e.g., Côte d'Ivoire, Senegal) are more efficient because the government acts as a partner with a carried interest, incentivizing faster production.

6. Legislative Reform in Peru

Peru is considering a "use-it-or-lose-it" bill to reduce concession holding times from 30 to 15 years.

• Argument: Adshead supports this, noting that "land banking" by inactive entities prevents junior explorers from accessing ground.
• Synthesis: To increase exploration, governments must combine land access reform with streamlined permitting. Without a clear path to drilling, investors are unwilling to fund junior explorers, regardless of the geological potential.

Conclusion

The mining sector is currently navigating a period of high geopolitical uncertainty and liquidity-driven volatility. While major players like Barrick face operational delays and transparency scrutiny, companies like AngloGold Ashanti and Zijin demonstrate that long-term capital commitment and aggressive acquisition strategies remain the primary drivers of growth. The overarching takeaway is that the industry’s future depends on balancing "Tier One" stability with more efficient, transparent permitting processes to ensure that exploration capital actually leads to production.