Battery Metals

Environmentalist Susan Collins was delighted when she learned New York is looking to expand its nickel-deposit law to include plastic and glass bottles containing juice, coffee and tea concoctions, plus sports and energy drinks. A redemption reward would ensure more of the materials are reused, she said.

“Coca-Cola, Pepsi and other big beverage companies have committed to using more recycled plastic in their bottles, but they need an adequate supply, and New York would be an important source,” said Collins, president of the Container Recycling Institute, a nonprofit advocacy group. “You’re talking about billions fewer bottles ending up in landfills or oceans.”

As a bonus, recycled materials from the city are of unusually high quality. That’s because plastic, glass, metal and paper products must be separated from regular trash before they’re carted away, Collins noted. The result is less contamination—which makes it easier to find buyers of the raw materials.

“It’s a big change,” Collins said of the expanded bottle-deposit bill that Gov. Andrew Cuomo introduced last month as part of his budget proposal. “New York is to be commended for taking this step.”

It’s fair to say Avi Kaner doesn’t share her enthusiasm. The co-owner of the Morton Williams supermarket chain isn’t relishing the thought of folks bringing in a lot more bottles and cans to his West 57th Street location, where he spent $10 million to turn the ground floor and basement into retail space.

“We keep this place nice and clean, in fitting with the neighborhood,” said Kaner, whose store is across the street from One57, a Billionaires Row apartment tower. “The last thing we need is people bringing more of their garbage here.”

At Kaner’s store, people bringing bottles and cans to redeem the deposit wait in the checkout line with other customers. Their returns—a maximum of 240 items per person daily—are stored near a street-facing window before they’re stashed in the basement for up to two weeks. It’s not an optimal use of space in a store where rent is $200 per square foot and every inch of shelving counts. Moreover, Kaner’s cost to pay the workers who handle returnables soared as the minimum wage jumped from $7.25 per hour six years ago to its current $15.

“Anything that can be done to prevent waste and help the planet is a good thing,” Kaner said. “But the economics of recycling don’t work for a business like ours.”

A battle pitting the likes of Collins against Kaner is playing out in Albany. Cuomo says expanding the number of containers covered by the state’s bottle- deposit law “will reduce litter in our communities, protect our water and create a cleaner and greener New York for all.” But such measures tend to face opposition in the Legislature, which is why the state’s recycling efforts have grown in fits and starts during the past 40 years.

More than 5 billion bottles are redeemed for deposit every year in New York. Industry experts say adding those for orange juice, energy drinks and the rest will add about 2 billion. That would total $350 million worth of redemptions, plus $250 million in fees for retailers and redemption centers, which are paid a state-mandated handling fee of 3.5 cents per container by beverage distributors. (Some are pushing Albany to increase that fee to keep pace with rising labor costs.)

Billions of nickels

The gusher of small change dates back to 1982, when the state first imposed a refundable nickel deposit on every carbonated beverage’s bottle or can. Plastic bottles of non- carbonated beverages were added 10 years ago. But that environmentally friendly move unleashed an unanticipated boom in street collectors digging through curbside garbage cans and bags. Such rummaging is illegal because at that point, recyclables belong to the city.

“Scavenging went up dramatically after water bottles were added, and it became a serious problem in the city,” said Robert Lange, former director of the Department of Sanitation’s Bureau of Waste Prevention, Reuse and Recycling.

Lange said he worries that Cuomo’s bill will undermine curbside recycling because scavengers would make off with even more containers before the Sanitation Department can collect them and bring them to Sims Municipal Recycling, which sorts and sells the material as a commodity. Glass has little value, but Sims’ sales of plastic and aluminum result in it charging the city less than it otherwise would.

The city last year paid $22 million to the vendor, which has a multiyear agreement to process recyclables at a Brooklyn facility. Under the contract, the city’s cost would rise if it brings Sims less valuable material.

Sims estimates that expanding the bottle bill would boost the number of plastic bottles targeted by scavengers by 60% and aluminum cans by 25%. Deposits also would be put on certain containers of high-density polyethylene, which is used in milk and detergent bottles, and make targets of the most valuable plastic in the curbside mix.

“A deposit on nonalcoholic beverage containers will simply divert more material of value from curbside programs, further challenging the viability of municipal recycling programs,” said Tom Outerbridge, general manager at Sims.

Those programs have been struggling for better than a year—since China began deeming much of the recycled material it once happily purchased to be unacceptably contaminated. Prices for scrap paper, plastic bottles and cardboard boxes plunged. Last month the Long Island town of Oyster Bay ended curbside pickup of glass because it couldn’t find anyone to buy it. “The town is prepared to collect glass as a recyclable if the market shifts back to its favor in the coming months or years,” spokesman Brian Nevin said.

Many localities have abandoned single-stream recycling and begun accepting only separated recyclables in hopes of finding markets for them.

The ups and downs of commodities markets and details of government contracts are of no particular concern to scavengers, who are thrilled to hear their unglamorous line of work might become a bit more lucrative.

Jesus, 41, said he spends 16 hours every day in Lower Manhattan filling a shopping cart with bottles and cans so he can send money to help his five children in his native Mexico. He usually starts his search around 4 p.m. and on a good night bags 4,000 containers, worth $200. On a tough day he nets about $70. Many apartment superintendents and office managers let him look through recyclables before they’re taken to the curb.

“I would be so happy if I could make some more money,” Jesus said. “It’s a hard job. I’m alone a lot.”

Chilean state miner Codelco said on Friday it had suspended operations at its northern copper mines Chuquicamata and Ministro Hales amid heavy rain.

Codelco said it had sent its daytime shift of workers home as a preventative measure and would evaluate whether to cancel its night shift as well.

It said emergency teams had been deployed to both mines along with management staff to monitor and mitigate any impact caused by the weather.

Codelco also confirmed that a polycarbonate roof had collapsed in an “industrial site” operated by a third party contractor at Chuquicamata mine, the state miner’s second largest by output. It said the collapse had not resulted in any injuries.

Ministro Hales produced around 215,000 tonnes of copper in 2017. Codelco is the world’s No. 1 copper producer.

Gold stocks’ young upleg is gathering steam, marching steadily to higher lows and higher highs. These bullish technicals are gradually improving sentiment, fueling mounting interest in this contrarian sector. That’s helping the gold stocks regain lost ground relative to gold, the driver of their profits. Fundamentals are growing more favorable as gold itself powers higher. All this portends much-bigger gold-stock gains coming.

Despite a strong rebound upleg in recent months, the gold miners’ stocks are still flying under the radars of most speculators and investors. They aren’t aware the gold stocks are running again, and likely don’t realize how massive gold-stock uplegs can grow. That’s unfortunate, because the biggest gains are won early in young uplegs before they are universally recognized. Buying low early on is the key to multiplying wealth.

The most-popular gold-stock benchmark these days is the GDX VanEck Vectors Gold Miners ETF. It was launched way back in May 2006, giving it a first-mover advantage that has grown into an insurmountable lead. This week GDX’s net assets of $10.5b were a colossal 52.4x larger than the next-biggest 1x-long major-gold-miners-ETF competitor! GDX is the lens through which most traders now view gold-stock fortunes.

And they’ve been excellent in recent months, with GDX boasting performance well outpacing gold as well as the general stock markets. This first chart looks at this sector ETF’s price action over the last several years or so. That’s technically been a gold-stock bull, because gold itself remained in a bull market over that span. Since gold overwhelmingly drives gold-stock performance, it defines gold-stock bull-bear cycles.

In mid-September GDX shares plunged to a deep 2.6-year secular low. That was fueled by an extreme forced capitulation in gold-stock shares, the result of stop losses being sequentially triggered in cascading fashion. The GDX price action of recent years setting the stage for this latest low and subsequent upleg is important to understand, and I’ve written recent essays explaining it. Today’s focus is the young upleg since.

It’s actually been quite impressive, and more traders will soon take notice. After bottoming at $17.57 on September 11th, GDX started powering higher in the tight well-defined uptrend bracketed above. Despite the incredibly-bearish sentiment you’d expect after a capitulation plunge leading to major lows, the gold stocks started marching higher on balance. Their young upleg has gathered steam and achieved much since.

GDX has carved a textbook-perfect series of higher lows and higher highs. That inexorably pushed it to a major triple breakout in late December and early January. GDX clawed back above three major overhead resistance lines. The first was the longstanding $21 support of GDX’s prior consolidation basing trend, which had persisted for 21.5 months before early August. Following a major breakdown, it became resistance.

The second was the downward-sloping resistance of a bearish descending-triangle technical pattern that had formed since GDX crested in early September 2017. And the third and most important was GDX’s 200-day moving average, shown in black in this chart. Seeing GDX overcome all three of these major overhead resistance zones in short order was a very bullish sign implying gold stocks were off to the races.

At best so far their young upleg per GDX has powered 29.1% higher in 4.7 months! That’s impressive by any standard. For comparison the S&P 500 broad-market stock index actually fell 6.4% during that span. And gold only rallied 10.3% in its own parallel upleg, so the major gold stocks have enjoyed good 2.8x upside leverage to the metal which drives their profits. That’s on the high side of the typical 2x to 3x range.

GDX has pulled back modestly since hitting its latest upleg high on January 31st, which was a breakout above its uptrend channel. Mid-upleg retreats within trend are perfectly normal and expected. They keep uplegs healthy and extend their longevity by periodically bleeding off excess greed. Without pullbacks, it would flare bright enough to suck in enough near-future buying for the upleg to prematurely exhaust itself.

And just this week this young gold-stock upleg reached another major technical milestone. On Tuesday GDX flashed a Golden Cross buy signal as its 50dma climbed back above its 200dma. Golden Crosses following deep oversold lows are incredibly bullish, signaling major new uplegs or entire bull markets! So they are one of the most-widely-followed and heeded buying signals among technically-oriented traders.

The initial major upleg of this gold-stock bull soared in essentially the first half of 2016, when GDX skyrocketed 151.2% higher in just 6.4 months! Nearly 2/3rds of those entire gains happened after the last Golden Cross following super-oversold lows flashed in early March 2016. These powerful buy signals aren’t just hard technical confirmation that a major upleg is underway, but they occur fairly early in upleg lifespans.

Today’s young gold-stock upleg is the most-consistent, longest-lived, and technically-sound one seen since that H1’16 monster! In general the more gradually uplegs rally, the stronger their technical and sentimental foundations and the longer they are likely to last. Slow-and-steady gains help prevent trader psychology from getting too unbalanced and extreme, granting more time for capital inflows to push prices higher.

GDX did enjoy a larger 34.6% surge over just 1.8 months leading into early February 2017. But that was so sharp it soon burned itself out and failed. Today’s young upleg is far more solid with a lot more staying power. And it remains on the small side by gold-stock standards, implying the lion’s share of its gains are still coming. While GDX’s massive 151.2% blast higher in H1’16 was unusual, gold-stock uplegs tend to get big.

The last secular gold-stock bull ran from November 2000 to September 2011. Just over half of that was in the pre-gold-stock-ETF era before GDX’s launch, so a different benchmark was used to measure it. During that long 10.8-year span, the classic HUI NYSE Arca Gold Bugs Index skyrocketed an astounding 1664.4% higher! Today’s hated gold stocks were the best-performing stock-market sector of that decade.

That life-changing secular gold-stock bull consisted of 12 separate uplegs. Excluding a giant anomalous one soaring after 2008’s first stock panic in a century, the 11 normal ones averaged gains of 80.7% over 7.9 months! Large uplegs are par for the course in the small and volatile gold-stock sector. So the 29.1% GDX gains we’ve seen so far in today’s young upleg are nothing. It’s likely to grow much larger in coming months.

Technically GDX should easily rally to $25 fairly soon, which was the old upper-resistance line of its long consolidation basing trend. That would extend this upleg’s gains over 42%. At that point GDX’s upside momentum would likely drive an upside breakout. And seeing GDX climbing to new multi-year highs over $25 would certainly catch traders’ attention, leading to a surge in capital inflows to chase gold stocks’ upside.

GDX’s bull-to-date peak was $31.32 in early August 2016, which wasn’t lofty as a mere 3.3-year high. It wouldn’t surprise me at all to see GDX challenge those levels before this young upleg matures then gives up its ghost. Rather interestingly that would grow this upleg to 78% gains, which is right in line with the previous secular bull’s average. The gold stocks still have lots of room to power much higher from here.

Their coming gains are inexorably intertwined with gold like usual. Gold-stock uplegs are directly driven by parallel gold uplegs. Rising gold prices boost gold stocks both sentimentally and fundamentally. They motivate speculators and investors to redeploy capital in the gold miners, and buying begets buying. The longer and higher gold stocks rally, the more traders want to buy them. Gold gains fuel this virtuous circle.

But more importantly higher gold prices directly drive higher earnings at the gold miners, fundamentally justifying higher gold-stock prices. This critical relationship is approximated by the ratio between gold-stock and gold price levels. It also portends big gold-stock gains coming. This next chart looks at the GDX/GLD Ratio during recent years’ gold-stock bull. GLD SPDR Gold Shares is the world’s leading gold ETF.

When this GGR is rising it means gold stocks are outperforming gold. That’s normally what happens in gold-stock uplegs. Like GDX itself, its ratio to gold is also climbing in a strong uptrend since those deep mid-September gold-stock lows. But the GGR remains on the low side of today’s gold bull, and has vast room to mean revert higher to pre-bull averages. I explained all this in depth back in a mid-October essay.

In mid-September as gold stocks’ forced capitulation decimated sentiment, the GGR collapsed to merely 0.155x. A single share of GDX was worth less than 1/6th of a single share of GLD. That also happened to be a 2.6-year secular low in the ratio of gold-stock price levels to gold prices. That simply reflected the seriously-bearish psychology that invariably accompanies major lows. But the GGR has recovered since.

By that latest interim GDX high on January 31st, the GGR had mean reverted back up to 0.182x. That is actually still below this bull market’s average of 0.186x over the past several years or so. But the climbing GGR proves gold stocks are making a major recovery relative to gold. Note above today’s young upleg is seeing the longest, strongest, and solidest GGR rally since H1’16! This upleg is the real deal, no flash in the pan.

After the GGR is forced to major lows or highs well off its averages, it tends to not only mean revert but overshoot proportionally. Since this key fundamental metric of gold stocks fell 0.030x below its bull mean at worst in mid-September, it ought to power a similar amount back above it before this upleg matures. That implies a 0.216x GGR is likely as gold stocks get more popular the longer their upleg rallies higher.

This week GLD traded near $124, so GDX regaining 0.216x means its price would rally to $26.78. That would make for a 52% upleg at today’s gold prices, and would drive that major breakout over GDX’s old $25 resistance line. And of course higher gold prices would lead to proportionally-higher GDX targets at any given GDX/GLD Ratio. Looking at today’s gold-stock levels compared to past means shows huge upside.

Back in mid-October when GDX was still only trading in the $18s and few believed a new gold-stock upleg had been born, I explored the GGR. This small contrarian sector was the last cheap one in wildly-expensive stock markets. I looked at some past GGR levels from the last secular gold-stock bull to point out how far gold stocks could soar. Consider the couple-year spans surrounding 2008’s wild stock panic.

In the 2 years after that extreme anomaly, 2009 and 2010, the GGR averaged 0.422x. And in the 2 years before that fear superstorm, it averaged 0.591x. Those are not high levels at major gold-stock toppings when euphoria reigned, but mere means. GDX ought to be able to regain those well-established levels later on in this bull market. At today’s gold prices, the post-panic average would catapult GDX to $52.33.

That would make for 198% gains from the recent secular low, a tripling in major gold miners’ stock prices! And that still wouldn’t be close to GDX’s $66.63 record hit at the end of gold stocks’ last secular bull back in September 2011. At the pre-panic 2-year-average GGR, this week’s gold levels would support an all-time GDX high of $73.28. That’s 317% higher than recent lows, more than a quadrupling in gold-stock price levels!

And all this assumes flat gold in the low $1300s, which is very unlikely. Gold is enjoying its own young upleg powering higher, which was sparked by the serious stock-market selloff in Q4. At $1350, $1400, or $1450 gold, the gold-stock price levels implied by GGR mean reversions are much higher. And that doesn’t account for the typical proportional overshoot towards the opposite extreme after deep GGR lows are hit.

The key takeaway here is gold stocks’ upside potential remains very large despite the progress so far in this young upleg. The big majority of this particular gold-stock upleg almost certainly remains ahead, so it’s not too late to get deployed before everyone else figures it out. Once gold stocks start surging faster than gold, the resulting bullish psychology becomes self-feeding enticing in more capital fueling bigger gains.

Big gold-stock uplegs are fully justified fundamentally by higher gold prices. Consider an example. The gold miners are now reporting their Q4 results, but the last complete set was Q3’s. Then the major gold miners of GDX reported average all-in-sustaining costs of $877 per ounce. These generally don’t change much regardless of prevailing gold prices. Mining costs are largely fixed when mines are being planned.

That’s when engineers and geologists decide which ore to mine, how to dig to it, and how to process it to recover the gold. So higher gold prices directly amplify gold miners’ bottom lines. While I’ll wade through the gold miners’ Q4 results once they are all released and write a new essay on them, AISCs are highly likely to remain near Q3 levels. Let’s call it $875 per ounce. In Q4 gold’s price averaged $1228 despite the rally.

That means the major gold miners were collectively earning about $353 per ounce mined. Meanwhile so far in Q1 gold is averaging $1296, which is a hefty 5.5% higher quarter-on-quarter. Assuming AISCs are flat across this industry, that implies gold miners are now earning $421 per ounce. That’s a massive 19.3% QoQ jump in profits on a 5.5% higher gold price, making for strong 3.5x upside leverage to gold.

The higher prevailing gold prices thanks to its own upleg are fueling fatter earnings for the gold miners. That provides the critical fundamental underpinning supporting major gold-stock uplegs. They are not just psychological phenomena driven by shifting sentiment, but actually reflect better operating conditions. I doubt historical gold-stock uplegs could’ve averaged such big gains without real fundamental foundations.

The unfortunate thing about major gold-stock uplegs is most speculators and investors ignore them until way too late. Traders love buying high and chasing momentum, but hate buying low before those big gains happen. So sadly the great majority of traders miss the great majority of major gold-stock uplegs. They don’t start deploying capital until after most of the gains are already won, which usually leads to later losses.

While today’s young upleg is gathering steam, we’ve likely only seen the first third or so. Thus there is still time to buy gold stocks relatively low before others start chasing their momentum in coming months after they are much higher. Why buy high later when you can still buy low now? And the best gains won’t be won in big ETFs like GDX, but in the stocks of fundamentally-superior smaller mid-tier and junior gold miners.

The major gold miners dominating GDX are really struggling to grow their gold production. Depletion is outpacing mine growth leading to higher costs and lower profits. That really retards their and thus GDX’s upside potential. But plenty of smaller gold miners are growing their output through new mine builds and expansions, which also lowers their costs. Their stocks’ upside potential utterly trounces the GDX majors.

The earlier you get deployed, the greater your gains will be. That’s why the trading books in our popular weekly and monthly newsletters are currently full of better gold and silver miners mostly added in recent months. The gains we won in 2016 were amazing the last time American stock investors returned to gold. Our newsletter stock trades that year averaged +111.0% and +89.7% annualized realized gains respectively!

The gold-stock gains should be similarly huge as today’s young gold and gold-stock uplegs grow. The gold miners are the last undervalued sector in these still-expensive stock markets, and rally with gold during stock-market bears unlike anything else. To multiply your wealth in the stock markets you have to do your homework and stay abreast, which our newsletters really help. They explain what’s going on in the markets, why, and how to trade them with specific stocks.

The bottom line is this young gold-stock upleg is really gathering steam. Technically it has rallied higher on balance for months now in a strong uptrend, carving higher lows and higher highs. GDX has broken out above three major resistance lines, and just flashed a key Golden Cross buy signal! All this has really started to shift sentiment back to bullish, which will attract in lots more capital to chase the momentum.

And these mounting gold-stock gains are fundamentally justified by gold’s own growing upleg. Gold-stock earnings amplify underlying gains in gold, making big stock-price surges righteous. Now is the time to get deployed relatively low, before most traders figure this out and start piling in. The evidence suggests a major gold-stock upleg is underway and mounting, and they tend to average gains far bigger than today’s.

There could be one trillion dollars underneath Northeast Iowa right now- at least that is what some area geologists believe could be the case.

Geologists with the Iowa Geological Survey, which partners with the University of Iowa, want to dig deeper to see if Iowa is home to a trove of precious metals, like copper, nickel, and platinum group elements (platinum, palladium, iridium, etc.) thousands of feet underground.

The Northeast Iowa Intrusive Complex is a formation that spreads through ten counties here in eastern Iowa- and geologists like Ryan Clark with the Iowa Geological Survey want permission to start drilling in a small portion of that area.

Clark says the hole would be small in diameter, but deep. The hole itself would only be, at ground-level, about one foot in diameter. But that hole would go more than two thousand feet underground.

“You can drill really far with a relatively small bit, and the technology is there,” Clark said.

The project was originally part of the United States Geological Survey’s fiscal planning, but due to recent budget cuts, the drilling project in northeast Iowa never happened. If the project were to take place, the Iowa Geological Survey would need $500,000; the most likely source for that funding would come from state government.

Then we would start to analyze them and try to get as much information as we can to help us paint that picture of: this is what the Northeast Iowa Intrusive Complex is,” Clark said.

Clark argues the money could end up well spent, bringing back a bigger return on the investment for the hole, opening a large financial gain for the state.

But others argue the risk may outweigh the reward.

“So they found minerals down, pick a number: 2,000, 3,000 feet… so? They’re there, then what?” asked Larry Stone, a concerned citizen in Clayton County. Stone serves as a member on the Clayton County Conservation Board, but emphasized in this instance, he is not speaking on behalf of the board, but representing his own opinions.

Stone says any kind of drilling project is a cause for concern for him- regardless of the potential value underground.

“It’s not a free trillion dollars down there,” Stone says. “It’s going to be a cost to get them.”

But Clark says the majority of the costs could come from an interested mining company- if it turned out to be something worth pursuing from the company’s standpoint.

“If this information looks like it’s going to show some promise, then a mineral exploration company would take that information and start doing their own exploration,” Clark said.

Stone described himself as “skeptical.”

“Naturally the companies that want to mine say: ‘oh yeah, we can do this,’” Stone said. “How many times have we heard that before?”

Stone says the potential mining poses an environmental concern- and could ruin the state’s water supply for generations: the Jordan Aquifer.

“Hypothetically, if in piercing that aquifer, they polluted it, that could be thousands of years of pollution in that aquifer,” Stone said.

But Clark says that likely would not be the case in a mining project like the one that would happen, if a mining company were to go in and extract the metals.

“This mining is happening beneath all of Iowa’s aquifers,” Clark said. “None of these minerals are going to be where we get our ground water from.”

Clark says in a perfect world, people would not see any large projects occurring for about ten years, and their biggest hurdle still remains securing funding to complete the research.