Digging Value: Europe Will Buy Mining Stocks

Today’s column: Norway wants to buy defense stocks, a better REE project for Trump, and China decides to stop forecasting smelter rates.

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

Norway Wants To Buy Defense Stocks Now

You’re probably bored (or annoyed) with how frequently I write about defense stocks. But the stories keep coming, and I can’t help but see the parallels between the defense and mining industries. 

One day, we’ll see these headlines for mining stocks. Until then, here’s Richard Milne from the FT arguing that Norway should be allowed to buy defense stocks:

⁠”Norway should drop a ban that is preventing its sovereign wealth fund, the world’s biggest, from investing in defence companies⁠⁠ such as Boeing, Airbus, Lockheed Martin and Honeywell, the two main opposition parties have said.

Norway’s $1.8tn oil fund has been barred from holding stakes in most defence companies since the early 2000s when the ⁠⁠country’s parliament imposed ethical rules that banned it from owning groups that make parts for nuclear or cluster weapons.”

I’ve written before about how “ethical” investing is basically selling stocks that go down and buying ones that go up. But another way to think about it is not buying stocks that may go up because other, more “ethical” stocks are going up (or at least not going down). 

Here’s what I mean. The ESG trade of wind and solar did well until it didn’t. Orstead and Vestas – two of the largest wind turbine manufacturers – are at their lows. Solar stocks are shot. 

You can’t be ethical and have declining stocks in your portfolio. So what do you do? You see which stocks have increased recently, and you buy those stocks. Those just so happen to be defense companies. 

But they could also be mining stocks: 

“The fund is subject to certain product exclusions from Norway’s parliament including tobacco, coal and parts for nuclear and cluster weapons. The last exclusion has stopped it from owning major defence companies such as Boeing, Airbus and Lockheed Martin since 2005-06.

There is growing pressure on Norway’s government and its new finance minister Jens Stoltenberg, the former head of Nato, to change that.

Ida Wolden Bache, governor of Norway’s central bank, which houses the oil fund, previously said the country “must be open to the possibility that what is considered to be ethically acceptable may change”.”

You need metals to make nuclear and cluster weapons, fighter jets, and all the hi-tech equipment and magnets that go into the jets. Everything Is Bullish Metals. 

That last remark is critical to my Defense = Mining thesis … “the country must be open to the possibilty that what is considered to be ethically acceptable may change.” 

Norway and Europe “must be open to the possibility” that mining stocks are an ethically acceptable part of an investment portfolio because they a) support Resource Nationalism and b) provide jobs, tax revenue, and supply diversification from “Big Bad” China. 

In other words, “get ready to learn geology, buddy!” 


A Busted REE SPAC Trump Trade

In February, I wrote about the potential Ukraine/US Rare Earth Element (REE) deal and how bad it was for the United States. 

“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.” 

A lot has happened since then. Trump killed the Ukraine deal, then chatted with Russia about an agreement, then the DRC offered their REE for military help, then Trump/Zelenskyy said the REE was back on, then it wasn’t. 

It’s complicated. The easier solution is to partner with Greenland and extract the REEs we know they have. 

For example, Energy Transition Metals (ETM) seems to have a lot of REEs. Here’s what I wrote in February: 

“So the ETM pitch is basically: 

  1. We own one of the largest REE projects globally, worth ~$7.5B
  2. China doesn’t own it all (yet)
  3. It’s close to the United States
  4. Our stock did really well during Trump’s first term 
  5. 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.”

And since this stock has done so well (flat since I published), why not give you another idea? How about Critical Metals Corp (CRML)?

The name sounds like a ChatGPT response to the CEO asking, “I just bought a REE mining company and don’t know what to name it. Give me a few ideas.” 

But what they lack in name originality they make up for in REE resources. 

“Critical Metals Corp (NASDAQ:CRML), a leading mining development company, has announced the results of an independent Preliminary Economic Assessment (PEA) on its Tanbreez Project in Southern Greenland on Monday. The PEA was conducted by Agricola Mining Consultants Pty Ltd and it reveals that 1% of the project’s 4.7 billion metric ton host rock has a Net Present Value (NPV) of approximately $3 billion.

The Tanbreez Project is one of the largest rare earth deposits in the world. The PEA demonstrates that the project is expected to have an Internal Rate of Return (IRR) of approximately 180%. The NPV was calculated based on an initial Mineral Resource Estimate (MRE) of 44.97 million metric tons of rare earth materials, which is about 1% of the host rock.”

Did I just read that:

  1. 1% of CRML’s 4.7Bt deposit has an NPV of $3B, which means that 
  2. The value for the entire 4.7Bt deposit is ~$300B??

I don’t know. If something sounds too good to be true in mining, it’s probably not true. Because if I’m reading this article, my first thought is, “Wow! CRML has to at least be trading at a $500M-$1B market cap. I mean, look at the NPV!” 

But CRML trades at a $117M market cap, down ~90% from its SPAC IPO at $10/share. 

Maybe the market knows something about Greenland or REEs or mining stocks not to be fooled by this PR. 

It still begs the question: why shouldn’t the US just strike a deal with Greenland for all these valuable rocks? Surely we can provide CRML with military aid or DOGE-driven efficiency training to get a piece of the $300B pie. 


China Agrees Not To Forecast Negative Prices

China’s copper smelters have decided not to issue treatment and refining charge (TC/RC) guidance for the second quarter of 2025. This is the kind of thing that sounds boring but is actually fascinating if you squint at it the right way. 

TC/RCs are essentially the tolls that copper miners pay to smelters to process raw copper concentrate into refined metal. When these charges go up, it means there’s plenty of copper concentrate available, and smelters can flex their pricing power. When they go down, it means supply is tight, and smelters are scrambling for feedstock. 

Today, TC/RCs are at their lowest levels in over a decade, which tells you something about the state of the copper market: it’s tight. 

So the “China Smelter Purchase Team” (CSPT) – like OPEC for copper smelters – decided to just not forecast smelter prices? From Hellenic Shipping News: 

“The scramble for stock has kept spot TC/RC prices negative since December, resulting in a benchmark price so disconnected it has become meaningless, said a source at the CSPT. 

The CSPT has never set negative price guidance, said a second source, who also spoke on condition of anonymity.” 

Here’s what’s happening: global copper concentrate supplies are being pinched by a combination of mine disruptions (like the closure of Panama’s Cobre mine) and growing demand from smelters in China, which have been expanding capacity like there’s no tomorrow. Spot TC/RCs in China have plummeted to $11.20 per ton—down 80% since December 2024—and some smelters are reportedly operating at below breakeven levels. 

Commodity expert Alexander Stahel thinks the negative TC rates have more to do with China’s smelting overcapacity. And I tend to agree.

Who knows. As both the world’s largest producer and consumer of refined copper, China has an outsized influence on global markets. If its smelters start cutting production en masse or if its economy slows down (as some indicators suggest), that could throw yet another wrench into an already volatile situation. 

Buckle up. 

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.

AK

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AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

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After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

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