Digging Value: Degens, Deals, and Disappointment

Digging Value is a twice-a-week column where I deep dive into markets, mining, and whatever financial absurdity caught my attention.

If you like your investing insights (not advice!) grounded in cash flows, hard assets, and common sense—but also recognize that markets frequently ignore all three—you’ll probably enjoy this.

Let’s explore the wild world of value investing in natural resources together.

Today’s column: WallStreetBets mines for 10-baggers, a mining company’s desperate effort to court Trump, and Ukraine’s slightly off minerals calculation.

“Digging for Value, One Story At A Time.”

Tendie Hunters Find Miners

Imagine: It’s February 2025, and r/wallstreetbets, the subreddit where 18 million self-described “degenerates” gather to trade memes and options, sink its tendie-soaked claws into your favorite industry.

That’s right. They’ve found mining stocks.

One user, u/Virtual_Seaweed7130, dropped a 3,100-upvote manifesto titled “This sector you’ve never touched is a 10-bagger,” claiming that mining – the industry that everyone hates because it always loses money – is the next big thing. And WallStreetBets is actually listening.

Seaweed starts with their “10-Bagger” Framework:

Left For Dead Prices – Prices that don’t reflect the baked in value or potential growth of the company, especially compared to historic averages, since prices are typically mean-reverting.
Little Investor Participation – Trades that aren’t crowded out by investors, muting potential future gains.
Ridiculous Potential – Massive margins of safety and explosive potential upside that lead to companies consistently growing their top line.

And then explains why mining fits this framework perfectly:

“You’ve been a regard for investing in mining over the past ~30 years. The index rose over ~5x, and you’re flat. Any active manager in Mining stocks has either been fired or full-ported into Apple at this point.

It’s even more stark when you compare to tech. Over the past 30 years, the tech sector delivered ~5,000% return, dwarfing the broader market’s ~1,874%.”

Seaweed says that buying mining stocks today is like buying Apple (AAPL) in the 2010’s at a 10x P/E.

“Buying Apple at 10-15 PE in the 2010’s is retrospectively a no-brainer. It gives you an incredible margin of safety if you’re buying growth for value prices.

Miners are cyclical companies deeply exposed to the price of the ores they mine. Whether it’s copper, silver, gold, or rare metals, miners generally scale with the price of their underlying commodity.

For gold miners, this hasn’t been the case. Despite gold roaring to highs around $2900 an ounce, the average gold miner is down over the past 20 years.

Many of these miners produce gold for less then $1000 an ounce and have been reinvesting their income into future production.”

This is why I love WallStreetBets. You can just pitch stocks by writing, “This company/idea is retrospectively a no-brainer, get your tendies while they’re hot, and its just like buying Apple, trust me.”

And they love it.

But Seaweed does make a good point on investor sentiment:

Tell me this, when’s the last time you saw someone shilling mining stocks on WSB? When’s the last time a mining stock IPO’d on robinhood, or your friend showed you his mining tendies? There’s basically zero investor interest left in the sector. It’s tarnished by ESG, political risk, and just not being “sexy”.

If you were an active manager following mining over the past 20 years, you lost your job. Why would anyone keep the regard that failed to beat the market for 20+ years?

Here’s the best part … even WallStreetBets hates mining stocks. That’s probably bullish? The enemy of my enemy is my alpha?

Users commented, “I invested in a deep sea mining company as my first ever investment and it went bankrupt 8 months later😂” and, “Mining stocks? More like mining for dumb” and my personal favorite, “If Warren Buffett isn’t even buying these boomer companies why should us degens?”

Look, any attention is good attention if you’re the mining industry. And at this point, can you really be picky on who you want as an investor? The industry is starved of capital.

Does it matter if that incremental dollar comes from Goldman or u/Virtual_Seaweed7130?

I see two end games here.

WallStreetBets forgets large markets like gold, silver, or copper and corners smaller commodities like tungsten, antimony, or uranium (probably better odds of success – not advice!).
Everyone on WallStreetBets loses money from mining stocks and it makes for great “loss porn” in a few weeks/months.

Which way, Tendie Man.

The “What If Trump Buys Greenland” Trade

Global commodity investing is kind of like a giant game of Settlers of Catan.

The game starts with players choosing where to “settle” to expand their empire. Ideally, you pick a location near valuable commodities like grain, wool, or ore. You then use these commodities to either build roads or as currency to acquire other commodities or as a trading token with other players.

Now instead of starting in one location and expanding from there, what if you just, I don’t know, bought a location from another player because you wanted it?

Of course that would happen because you’re playing against Donald Trump.

Here’s Kristie Batten of Mining.com:

“A little-known Australian junior miner has found itself in the global spotlight following renewed speculation about former US President Donald Trump’s interest in acquiring Greenland.

Shares in Energy Transition Minerals (ASX: ETM) surged by as much as 150% in the first two weeks of January and remain up 75% year-to-date. Investors are speculating that Trump’s interest could revive ETM’s stalled Kvanefjeld rare earths project.

The US has previously explored acquiring Greenland on three occasions, including during Trump’s first term. Although an autonomous territory of Denmark, Greenland is geographically closer to New York than Copenhagen, making it a strategic gateway between North America and Europe. Trump has described the island as vital to US national security, while its vast critical mineral reserves add further strategic value.”

Energy Transition Metals (ETM) is the classic mining story stock.

The company owns the The Kvanefjeld Rare Earths Project with 1.01Bt of Rare Earth Ore (REO) grading 1.1%, and 593Mlbs of uranium.

In 2021, Greenland halted the project over uranium radioactivity concerns:

“In 2021, Greenland’s IA Party passed Act No. 20 — known as the Uranium Act — which bans the exploration and production of uranium above 100 parts per million. Kvanefjeld contains 592.8 million pounds of uranium grading 266 ppm, effectively halting ETM’s efforts to secure an exploitation license.

“I believe applying Act 20 retroactively to our project amounts to de facto expropriation,” Mamadou said.

ETM attempted negotiations with the Greenlandic government but was met with resistance, prompting the company to initiate a dispute resolution process. It filed a statement of claim in 2023 and launched legal proceedings in Greenlandic and Danish courts.”

So the ETM pitch is basically:

We own one of the largest REE projects globally worth ~$7.5B
China doesn’t own it all (yet)
It’s close to the United States
Our stock did really well during Trump’s first term
Let’s run this first-term energy back and all make a lot of money?

I’m not going to lie. I wrote about ETM mainly because it shows the power of commodities in geopolitics. But I kind of like this idea now?

The company already spent AUD $150M developing this project and its market cap is AUD $111M. So you’re buying below investment capex for a Trump-buys-Greenland call option.

Mining investors value developing mining stocks like ETM at 1-5% of in-situ value, which is just a fancy way of saying “the amount of valuable stuff in the ground.”

ETM’s project is “worth” $7.5B. Assuming a 5% in-situ valuation gets us $375M in market cap.

And who knows, maybe Greenland pulls a Nova Scotia and lifts its uranium ban.

I’ve seen worse Trump trades (not advice!).

Ukraine’s Rare Earth Bluff

If the whole buying Greenland thing fails, I guess there’s still Ukraine’s Rare Earths, right?

Last week, President Trump mentioned that Ukraine wanted to repay its war debt with $500B in rare earth minerals.

It sounds like a great trade on the surface. We’ve spent ~$183B funding Ukraine’s war efforts. They’re offering us $500B worth of something we desperately need.

Seems like a slam dunk?

Not according to Javier Blas:

“What Ukraine has is scorched earth; what it doesn’t have is rare earths. Surprisingly, many people — not least, US President Donald Trump — seem convinced the country has a rich mineral endowment. It’s a folly.

It’s not the first time that Washington has gotten its geology wrong in a war zone. Back in 2010, the US announced it had discovered $1 trillion of untapped mineral deposits in Afghanistan, including some crucial for electric-car batteries, like lithium. The Pentagon went as far as describing Afghanistan as “the Saudi Arabia of lithium.”

All very important stuff, the kind of geo-economic shock that redraws the global political map. But it was, as many said then, and as everyone knows now, a complete fantasy. The same applies to Ukraine’s alleged riches.”

It’s not that Ukraine doesn’t have rare earth minerals. It’s that they don’t have as many as they thought, and maybe those “rare earths” aren’t “rare” but common commodities like iron ore, coal, or titanium.

Which are still valuable! But still a funny misrepresentation.

Imagine Zelensky and his officials putting together his repayment package.

Zelensky: “How much has the US given us so far?”

Officials: “Around $183B, sir.”

Zelensky: “Okay, that’s a lot. I know they need rare earths. Just tell them we’ll give them $500B worth of rare earths.”

Officials: “But sir, we only have a few small scandium mines, and the rest are common ores like coal, iron ore, and titanium. And unfortunately, sir, I don’t think those amount to $500B. And even if they did, we can’t mine them because the geology is too difficult, there are no roads, and everything is still abandoned.”

Zelensky: “None of that matters. Just tell them its all rare earths we’ll be fine.”

Back to Javier:

“I see two possibilities: that Trump is right — and I’m very wrong — and Ukraine has, in fact, lots of rare earths; or that he misspoke, and rather than “rare earths” he meant other minerals. Or perhaps he took the small potential of a single element — scandium — and extrapolated.

Let’s explore the second option, because at least it would make some sense. While Ukraine doesn’t have commercial rare-earth deposits, it does have mines housing other minerals. Before its war with Russia, Ukraine produced significant amounts of iron ore and coal. Neither are strategic, but the country had been making decent money from both. Problem? Some mines lie now in territory conquered by Russia.

Maybe Trump conflated “rare earths” with the much broader concept of “critical minerals.” Of the latter, Ukraine has some commercial mines of titanium and gallium. Both are fairly valuable and have some strategic importance, but then again, controlling either wouldn’t alter geo-economics. And they certainly aren’t worth Trump’s expressed $500 billion.

Still, the American president steadfastly referred to rare earths; not once, but several times. So then, perhaps he knows something the commodity world doesn’t. But I found no credible source that says Ukraine is brimming with reserves.”

There are two other problems with Trump’s $500B demand:

Global annual rare earth production is worth $15B
Global annual copper production is worth $250B

So either:

Ukraine actually has 33x the amount of global REE production hidden somewhere in the country that nobody knows about (perhaps!).

Ukraine can provide the equivalent value of two year’s worth of global copper production itself (probably not!).

It’s safe to assume that Ukraine doesn’t have $500B worth of rare earth minerals or even “common” mineable minerals.

But what if it did? What if $500B of rock was there for Trump’s taking?

Spoiler: The US still wouldn’t break even on its Ukraine war “investment.”

Because mining is difficult and expensive (shocking, I know):

“Many highlight the Novopoltavske deposit, discovered by the Soviets in 1970, as a potential source. While tiny amounts of rare earths are present there, digging them out seems impossible — hence why the site remains an unproductive deposit rather than a mine more than 50 years after its discovery. The Ukrainian government has described Novopoltavske as “relatively difficult” to mine and said that any rare-earth yield would be “off balance,” meaning that it’s not economical to exploit them at current prices. Worse, the mineralogy goes against it: The host source is a mineral that makes extracting the elements very hard.”

How much would it cost the US to extract $500B worth of minerals from Ukraine’s deposits? $100B, $200B, $300B? All those costs eat into the return on that $183B investment to “call it even.”

I don’t know. Trump is Trump. And maybe he’ll tweet somthing like, “We’re going to extract Ukraine’s rare earth elements, and we’re going to make Canada pay for it unless it becomes the 51st state.”

Or we send Rand Paul to audit Ukraine’s rare earth minerals before we agree to any deal.