In this week’s Capital 10X Navigator we breakdown the tame inflation print and the Fed’s hawkish tone. We also highlight two key reports Capital 10X published: Our deep dive primer on Largo and the vanadium industry, and the global nickel shortage.

Markets

Tame Inflation Print and the Fed’s Rate Hike

Markets were served up a mixed bag news last week. On the positive end, November’s CPI inflation print coming in at 7.1% (below expectations of 7.3%); which represents 5 consecutive months of falling YoY CPI figures (peak was 9.1% in June).

The services component (magenta) of the CPI continues to rise albeit less quickly, while goods (blue) and energy (yellow) are narrowing materially.

Then on Wednesday the Fed hiked interest rates by 50bps to a range of 4.25%-4.5%; policymakers also signaled to the market that they may need to lift rates above 5.1% and keep them there until 2024 to tame high inflation out of the economy. This effectively poured cold water on the market, sending the S&P 500 lower by -2.55% and Nasdaq lower by -2.75% for the week.

Commodities faring better last week; with the oil up +3.26% and the Bloomberg Commodity Index (basket of 23 commodities) was up 0.87%.

BATTERY METALS

Vanadium: Largo Deep Dive Report

The global energy order is going through a once in a century shift. These changes are creating investment opportunities that can last decades for the companies positioned to take advantage.

Largo (TSE:LGO | NASDAQ:LGO)  sits at the epicenter of it all.

Capital 10X’s deep dive report on Largo breaks down the global energy shifts taking place, the opportunities they will create and why Largo may quickly become one of the highest value ways to invest in these multi-decade growth trends.

The Deep Dive Report Covers:

• The history of Vanadium
• Supply/Demand outlook
• The bright future for VRFBs (Vanadium Batteries)
• Largo’s deep discount to peers
• And much more

Global Nickel Shortage in Focus, Canada has a Key Role to Play

Like many other battery metals, nickel is staring at a looming supply shortage. Fourteen years of underinvestment is running headlong into surging demand from a rapidly electrifying world.

At the same time demand is exploding, mining capital is running at the same level as 12 years ago and forecasts call for continued cuts in spending. Canada is already a major global player when looking at the largest producing nickel mines.

Three of the eight largest nickel producing properties are located in Canada. We highlight two promising Canadian nickel companies in our note: Canada Nickel (CVE:CNC) and Quebec Nickel (CNSX:QNI).

Glencore CEO: Huge Deficit Looming for Copper

At Glencore’s investor day CEO Gary Nagle stated that it will be harder to lift copper supplies this cycle in comparison to previous cycles – “this time is different”.

“There’s a huge deficit coming in copper, and as much as people write about it, the price is not yet reflecting it,” Nagle said. He presented estimates showing a cumulative gap between projected demand and supply of 50 million tons between 2022 and 2030. That compares with current world copper demand of about 25 million tons a year.

The graph below highlights the dramatic decline in copper industry expansionary capex, it is estimated to be $12 billion by 2025, 60% below the peak of $32 billion in 2012. Key reasons for the reduced capex include:

• Financial: Taxes and regulation, capital controls, tariffs & fiscal stability
• ESG & Reputation: Environmental concerns and labour relations
• Disruption: Infrastructure constraints, strike and civil unrest.
• Access: Permitting, litigation and local stakeholders.

Copper equities: Amerigo (TSE:ARG), Lundin Mining (TSE:LUN), Hudbay Minerals (TSE:HBM)

COMPANY UPDATES

Rio Tinto Actively Looking for Lithium Deals

• Rio Tinto Group is actively looking for lithium acquisitions, predicting prices for the key raw material in electric-vehicle batteries will stay high for a “long period of time.”
• Rio, mainly an iron ore miner, wants to increase its exposure to metals required for clean energy technology, including copper and lithium, and is developing projects for the battery metal in Argentina and California. “High-grade brines and Australia hard rock” will be called upon to meet demand, the company said.

Canada Nickel Appoints Financial Advisors, Reaches Permitting Milestone

• Canada Nickel (CVE:CNC) announced that it has engaged Deutche Bank and Scotiabank as financial advisors for the equity part of the project financing for their Crawford Nickel Sulphide Project (Crawford).
• Canada Nickel has completed another significant permitting milestone on the critical path towards production, by filing the detailed project description with the Impact Assessment Agency of Canada earlier this week. We continue to target receipt of permits by mid-2025 with construction to immediately follow.

Quebec Nickel Reports New High-Grade Assay Results from Fortin Sill Zone Drilling

• Quebec Nickel (CNSX:QNI) Reports New High-Grade Assay Results Including 1.07% Ni, 1.19% Cu, 364 Ppm Co, 2.70 G/t Pt-Pd-Au Over 4.77 Metres
• Assay results are reported here for four holes completed at the Fortin Sill Zone and demonstrate the zone extends from the mineralized surface outcrop to the southeast. In addition, the assay results also highlight the potential for discovery of additional Fortin Sill Zone-like bodies at depth.
• The company also annouced the closing of the first tranche of its private placement, aggregate gross proceeds from the first tranche is $5.6 million. The financing had new participation and support from three Quebec-based institutional funds for this financing, SIDEX L.P., Société de Développement de la Baie-James and CDPQ.

First Quantum and Panama Fail to Reach Agreement

• First Quantum (TSE:FM) and Panama failed to reach an agreement with Panama’s government over its operation of the Cobre Panama mine. The point of contention relates to a clause that First Quantum must pay a minimum of $375 million in royalties to the state.
• The government has ordered First Quantum to halt operations – this would result in further tightening global supplies of copper. At full capacity Cobre Panama can producer more than 300K tonnes of copper per year (1.5% of global production of the metal).

Largo Inc. is a market awareness client of Capital 10X.

Canada Nickel is a market awareness client of Capital 10X. For more information, including potential conflicts of interest please see our Content Disclaimer.