This week’s column: Crypto is still hilarious, iron ore is now strategic, and China still dominates commodity supply chains.
Let’s get after it!
“Digging for Value, One Story At A Time.”
Crypto Backed By Nothing
Man, I love the crypto space. Where else can you get stories like this?
“The U.S. Securities and Exchange Commission has sued against crypto company Unicoin and three executives on fraud charges for saying the company raised over USD$100 million in tokens backed by real estate when they weren’t.
Filed on Tuesday, the SEC sued Unicorn’s CEO Alexander Konanykhin, former chair Maria Moschini, senior vice president and general council Richard Devlin and former chief investment officer and investor relations officer Alejandro Dominquez on securities law violations.
The SEC alleged that Unicoin misled investors by falsely claiming ownership of real estate properties and inflating their values.”
This sounds very on brand. Why buy real estate when you can buy a token that says, “I own this piece of real estate.” There’s really no difference, except that when you buy the real estate, you can go and touch it to make sure that a) you own it and b) it’s real. You can’t do that with a crypto token.
Asset-backed securities are also very common. Take mining stocks. Shares in a mining company are backed by the mineral deposit and any future free cash flows the mine generates. Sometimes investors value mining stocks in the hundreds of millions of dollars, when all the company has are a few drill holes. So I kind of get it.
But what if that company, I don’t know, never actually bought the mine or drilled a single hole?
“The SEC alleged that Unicoin misled investors by falsely claiming ownership of real estate properties and inflating their values.
“For example, between September 2023 and January 2024, the Promoting Defendants announced acquisitions of properties in Argentina, Thailand, Antigua, and the Bahamas, purportedly with appraised values totaling more than of USD$1.4 billion; in fact, the majority of those transactions never closed and the actual combined value of the four properties was no more than USD$300 million,” the complaint said.”
Imagine signing the subscription document for these tokens.
Investor: “It says here you own properties in Argentina, Thailand, Antigua, and the Bahamas. Is that true? Can I visit them?”
Unicoin: “Wellllllll, actually we don’t own them yet. They sent us the closing documents, all we need to do is e-sign.”
Investor: “Good enough for me.”
Two things can be true at the same time:
- Unicoin deceived, misled, and defrauded investors about a) what properties they owned and b) the value of those properties.
- Those investors deserve to lose their money.
Mining gets a bad reputation – “a hole in the ground with a liar on top” – but could you imagine if a junior mining company did this? I mean, they probably have at some point. But the playbook is right there (not advice!):
- Step 1: Scroll through a list of mineral deposits sorted by in-situ value
- Step 2: Pick your favorites (favorite vacation spot or funny name or favorite metal)
- Step 3: Tell investors you now own these deposits and they’re worth billions of dollars
- Step 4: Hope nobody does due diligence
- Step 5: Profit???
What could be more absurd than that? Wait, I know. What if you promised a nine-million percent return?
“Additionally, Unicoin invests in a portfolio of startups to support its valuation. The company frequently compares its potential growth to Bitcoin’s historic rise. However, critics question its marketing tactics and claims of outsized returns.
The SEC happens to be one of these critics. The filing said the promoting defendants made several bold claims.
They posted on social media and their website about potential returns of 9 million per cent, comparing Unicoin to Bitcoin’s historic rise. They urged investors to act early and buy Unicoins, claiming early Bitcoin adopters became millionaires and even billionaires.”
I can’t get enough of these stories. But my favorite part of all:
“Konanykhin argued that the SEC has consistently stacked the deck against crypto and continues to do so.”
I don’t know. You stack the deck against yourself when you promise nine-million percent returns and say, “Hey, look at what Bitcoin did. That will happen to us, and we also have nice beach houses in Antigua!”
Everything Is A Critical Metal
We’ve written before about how everything is Nationally Strategic … it’s a vibe sort of thing. Does it feel Nationally Strategic to you? Then, sure, it is.
There are also obvious financial reasons to label a commodity (or a company’s deposit/project) Nationally Strategic. I wrote about one example, European Metal Holdings (EMH), in March:
“This morning, the EU declared the Cinovec Project “Nationally Strategic” under its EU Critical Raw Materials Act. And what did the stock do? It went up 155% (and counting!).
Here’s why this matters. These companies are telling you exactly what will happen to US mining stocks once Trump starts saying, “You, you, you, and you … you’re all nationally strategic. Get them their approvals.”
We will see stocks return 3-5x in months, maybe weeks, under this new Regime. EMH is the canary in the coal mine.
Can you think of a better time to invest in natural resources? Maybe when China went on their buying spree, I guess. But is this not just as good, if not better? What happens to mining stocks when every national government decides it needs domestic production? And to do that, must declare all domestic projects “Nationally Strategic”?
It’s going to be bananas. And I can’t wait.”
I always thought that Robert Friedland sometimes reads Digging Value. But how would I know for sure? This might be my answer:
“Mining billionaire Robert Friedland’s latest venture, Ivanhoe Atlantic, is reportedly lobbying the US government to add high-grade iron ore to the country’s list of critical minerals.
The move aims to align with Washington’s broader push to secure materials essential for military manufacturing, as part of a national strategy to boost defence capabilities. The company’s flagship project, Nimba in Guinea, is expected to churn out 2 to 5 million tonnes of high-grade iron ore late this year. Production is set to scale up to 25 million tonnes annually within seven years.”
My guess is that Friedland read my March column, thought, “Hmm … I too would appreciate a 155% one-day return on a company I own.” And did something about it.
Friedland owns Ivanhoe Atlantic, not to be confused with Ivanhoe Mines (IVN) or Ivanhoe Electric (IE). Ivanhoe Atlantic owns an iron ore project in Guinea. The logic is simple:
- Buy an iron ore project.
- Name it something boring and uncreative.
- Lobby the government to make iron ore a critical metal to receive massive government funding.
- Profit???
The company makes a compelling case:
““You can’t build battleships without high-grade, high-tensile steel, so I think there is going to come a point where it goes on the critical minerals supply list in the US,” Ivanhoe Atlantic president and chief executive, Bronwyn Barnes, said speaking at an industry event Wednesday.
“The US critical mineral supply list is dominated by materials that are required for the defence sector…not having high-grade iron ore on that critical mineral supply list is a shortcoming,” Barnes noted.”
I think there’s a trade here. Suppose Friedland gets his way and the US lists iron ore as a critical metal. There are dozens of dirt-cheap iron ore plays in Australia that could rise 25-50% in a day if they announced a critical mineral label.
You may already know of or are invested in a few of these plays. Let me know which ones I should research.
China Still Dominates Supply Chains
One of Trump’s big promises, and a goal of his tariff “policy”, is to return supply chains to the US. Doing that would reduce our dependency on China, bring more jobs to the US, and create a stronger, more resilient nation.
All good things, right?
The problem is that China dominates the global commodity supply chain. And we shouldn’t forget that. This challenge – domesticating supply chains – will take decades. Here’s the latest from the FT:
“China dominates most supply chains, exerting a hold over all stages from mining to metal processing, as well as the production of the batteries and magnets used in electric vehicles and other key industrial components.
The country is the leading refiner and processor for 19 of the 20 minerals analysed by the IEA, with an average market share of around 70 per cent.
Its dominance is likely to increase even as US President Donald Trump has taken an aggressive approach to building a domestic industry, including by imposing import tariffs and seeking deals with potential suppliers such as the Democratic Republic of Congo, Greenland and Ukraine.”
And it’s not just the refining and processing. The world’s largest commodity producers are increasing their share of global production.
“Average market share of the top three producers of copper, lithium, nickel, cobalt, graphite and rare earth elements was 86 per cent in 2024, up from about 82 per cent in 2020, the agency said.
The Paris-based agency noted that almost all supply growth in different segments of the metals markets came from the single top producer, such as Indonesia for nickel and China for cobalt, graphite and rare earths.”
There will be opportunities for life-changing returns in the metals and mining space as this power struggle unfolds. Will you be ready?
