Uncertainty the watchword for junior miners – unless you’ve got lithium

Lithium.

In the mining markets, it’s all about lithium.

Of course, it’s been that way for a while now, but it’s also true to say that for much of the earlier part of 2022 it was possible, and even relatively easy, to raise money on projects containing a variety of commodities.

Now, as December gets ready to roll around into January 2023, all you’ll hear the brokers saying is that even if you’ve got a bad lithium project they can raise you money, but that everything else is very hard.

Only specialist brokers still seem to have a well of investors that they can tap successfully to keep the exploration sector show on the road.

Everyone else is keeping their heads down, even in those perennial favourites copper and gold, where the underlying price has held up relatively well.

Of course, we’ve seen worse in living memory – after the global financial crisis in 2008, most notably, but also at varying periods subsequently. And we’ve also seen better.

After all, 2022 started out with so much promise.

There’d been a boom of sorts during covid, as supply chain issues and associated global shortages drove up commodities prices and stimulated the demand for new projects.

Then, after the covid crisis began to wind down – in most peoples’ minds at least – there was optimism about the Build Back Better campaigns that various governments around the world launched simultaneously.

As spring turned to summer, summer to autumn and then with the onset of northern hemisphere winter, against all previous expectation the gloom in the junior mining sector just got deeper and deeper.

Where did it all go wrong?

First, there was Russia’s invasion of Ukraine.

Initially, this was a mixed blessing, since one of the world’s major supplier of key commodities like nickel, gold, platinum and diamonds was suddenly knocked out of the global supply chain. In response to the resultant shortages, prices leapt.

But those leaping commodity prices were running in tandem with an across-the—board movement in prices that was affecting every sector.

The reckless money printing that panicked governments initiated in response to covid was coming home to roost.

With almost everything in the world becoming more expensive at a rate of knots, demand, unsurprisingly, faltered dramatically.

Where spring had looked so rosy, in summer American news outlets were arguing about the technical definition of recession, and whether or not the US was actually in one.

That of course, was a purely political argument, but the underlying dynamic, that the economy was faltering however you defined it, was real enough.

All of a sudden, metals that had been in demand for building back better, were no longer flavour of the month. No-one, it turned out, was building much of anything.

And then the problem got worse.

In the world view of certain zealous Democrats in the US, covid never went away, and that’s a view that’s apparently shared at the highest level of the

Chinese communist party, where rolling and ongoing lockdowns have been stifling economic activity for months.

Do masks work? Isn’t it true that covid only really kills the elderly? Are the vaccines worth their salt if they don’t prevent infection or the spread of covid?

The Chinese still aren’t taking any chances on any of those questions, to the point where the stringency of their anti-covid measures have at times threatened public order.

China’s example is an instructive insight into one possible future – that of a biomedical security state, where social credit scores related to your compliance with health edicts have a direct impact on the amount of freedom you’re allowed to have.

More immediately, though, the Chinese state has once again demonstrated that although economic growth is of immense importance to it, it’s not the goal. The ultimate goal is control.

And as long as that’s the case, a permanent reliance on steady and consistent Chinese demand for commodities remains chimeric.

So, we leave 2022 roughly as we began – shocked and reeling from a different set of crises and beginning to get the sense that the world may indeed have entered a period of permanent crisis.

Does 2023 hold more promise than 2022 ended up delivering? Maybe. The crucial factors will be inflation, the dollar, war, and Chinese communism.