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: Norway’s profit problem, mining as the original Lindy story, and the hilarious irony of ESG investing.
“Digging for Value, One Story At A Time.”
More Money More Problems
It goes without saying that the Russia/Ukraine war was/is terrible for humanity and everyone involved.
But, it has kind of been good for Norway?:
“The basic facts are not up for debate. After the outbreak of the Ukraine war caused natural gas prices to rise sharply in Europe, Norway reaped windfall profits totalling some €108 billion, according to Norway’s Ministry of Finance.”
And since we’re on the topic of “who should pay for Ukraine’s reconstruction”, maybe that EUR 109B should go to Ukraine? At least that’s what the author suggests:
“But Norway has kept its windfall for itself, providing a measly three billion euros in aid to Ukraine in its 2025 budget, only slightly up from the previous year. This approach is simply wrong: Norway must transfer its recent super-profits, excess profits above the normal level, in full, directly to Ukraine. Unfortunately, Prime Minister Jonas Gahr Store and Finance Minister Trygve Slagsvold Vedum seem more interested in justifying their decision not to do so than in helping Ukraine, Europe or even future Norwegians.”
On one hand, that makes sense. Norway made EUR 109B from the war and they should give some of that to Ukraine. Why not spare some of the war-induced spoils with the country hurt most by it?
But on the other hand, they don’t have to?
“Store and Vedum contend that the windfall gains were a normal result of the myriad market forces that determine gas prices. But this argument is disingenuous. While it is true that many factors shape energy prices, Norway’s excess profits overwhelmingly reflect one: in 2022–23, it had in Europe a captive market for its natural-gas exports. This was a direct result of the Ukraine war: Russia had cut its natural-gas supplies to Europe, but European gas importers had not yet managed to build liquefied natural gas terminals to offset the loss.
Store and Vedum do not stop at dismissing Norway’s war profits as good fortune; they claim that their government, and the oil companies operating in Norway, did our European neighbours a favour by stepping up gas supplies when Russian deliveries ceased.”
It’s like if a hedge fund shorted a distressed company’s stock, made a ton of money in the process, and then got an email from said distressed company asking, “You profited from our misfortune. Can you please wire us 100% of the profits you made from your short position?”
That trade would work in some dystopian altruistic world. But you can understand why Norway doesn’t want to make that trade.
But what if the US wanted them to?
“That is more than the value of all military and civilian support Ukraine has received from the United States and Germany combined from when the war started through October 2024. It is roughly one-third of the value of the Russian central-bank assets that are currently frozen in the West (and which Western governments have extensively debated channelling to Ukraine for defence and reconstruction).”
Trump loves this type of ammo. Imagine the press conference – “We’re going to rebuild Ukraine, and we’re going to make Norway pay for it. In fact, the amount of excess profit they made is almost equal to what we’ve given Ukraine. Isn’t that fascinating, numbers, when they add up and equal like that. It’s beautiful.”
I mean it could work!
Miners Are The Original Lindy Stock
There’s this thing called the “Lindy Effect” which means if something has been around for a long time, it will probably stay around for an even longer time.
Investors trust this framework when buying gambling, swimming pool, insurance, or alcoholic beverage stocks.
But never mining stocks. Which is odd because there’s nothing more “Lindy” than mining. And now we have evidence:
“Egyptian archaeologists have now completed their two-year excavation of an extensive gold mining complex dating back to a time long before Christ. This monumental achievement has been attracting a great deal of attention.”
That’s wild! I mean, software companies are cool. They have high margins, generate tons of cash, and their stocks usually go up over time. But they don’t connect you to “a time long before Christ.” And isn’t that more rewarding anyways?
This is probably more of a bug than a feature … but the ancient Egyptians used similar techniques and processes for extracting the gold 3,000 years ago.
“Notably, it contains a fully equipped facility for extracting gold from quartz veins, areas allocated for grinding and crushing, filtration and sedimentation basins, and archaic clay gold smelting furnaces.
In addition to the gold mining infrastructure of antiquity at the site, they dug up an entire residential district that housed the ancient Egyptian miners. This area had workshops, places of worship, the remains of administrative facilities and bathhouses.”
Maybe one day, thousands of years from now, an advanced civilization will excavate data cooling stations and laptops from the rubble, and laugh at how we built our AI datacenters.
And that’s the point, right? Technology is constantly changing. But the materials we use to build the technology? Not so much.
I’m bullish mining stocks in Lindy portfolios.
It’s Only ESG If The Stock Goes Up
Last week we talked about how any stock can be an ESG stock if it helps national security. If that’s true, then mining stocks are the most ESG-friendly companies you can buy.
But what if there was another definition of ESG? Like something so obvious it can’t be real. Well, here’s a recent FT.com article:
“Ethical investors are slowly starting to shed their squeamishness about the sector […] Indeed, holdings of defence stocks by environmental, social and governance-focused funds had swollen to €8bn by the last quarter of 2024, up from €2.7bn in the first quarter of 2022. That’s partly a factor of the sector’s massive outperformance. Stocks in Europe’s aerospace and defence sector have risen 2.5 times since Russia invaded Ukraine in 2022, multiples of the benchmark gains.”
So an ESG stock is any stock that goes up?
I can’t imagine the mental gymnastics European ESG funds do to stay compliant. Remember that Japanese HVAC company that secretly made chemical weapons? Now we know the real reason why ESG funds canceled it: it’s stock didn’t go up enough.
This is the ESG end-game we all kind of knew was coming. Ethics aren’t fixed, but ever-changing to the benefit of Large Pension Fund IV. Back to the FT article:
“Take Norway’s $1.8tn sovereign wealth fund, formally known as the Government Pension Fund Global. Those investing the bounty from the country’s natural resources should note that “what is considered to be ethically acceptable may change” at a time of military rearmament and growing tensions, said central banker Ida Wolden Bache last month.”
My favorite part is, “what is considered to be ethically acceptable may change.” It’s my favorite part because eventually they’ll use this logic to buy mining stocks.
It will happen slowly, then suddenly. All it takes is a few months (or quarters) of outperformance. Ethics follows money, not the other way around. And when miners outperform, the “ethics” will change to allow mining stocks into every ESG fund.
I mean mining has a great ESG PR spin story: The Green Economy, National Security, Domestic Jobs Growth, Resource Nationalism. Pick your favorite.
As long as the ends justify the means, right? The article concludes that:
“Sure, weaponry will never be a cuddly sector. But a combination of improved standing in the world and huge outperformance mean it will keep sliding into more ESG funds. After all, few things spell out sustainability like peace and security.”
Mining will never be a cuddly environmentally-friendly sector. But it could be a sector that makes money for large pension funds. And haven’t we learned that they’re the same thing?
