Previous episode: https://www.cruxinvestor.com/posts/mining-sector-ma-activities-production-centers-evolves-opportunities-6039

Recording date: 18th November 2024

The 2024 U.S. election results are poised to have a significant impact on the mining sector, as a Republican sweep led by the re-election of Donald Trump ushers in a period of potentially pro-growth, pro-development policies. In this edition of The Compass podcast, Olive Resource Capital's Executive Chairman Derek McPherson and President and CEO Samuel Pelaez share their insights on the implications for investors in resource equities.

While overall market sentiment has deteriorated in recent weeks, gold, silver and copper prices have remained remarkably resilient, even in the face of a surging U.S. dollar. This suggests the underlying fundamentals for these commodities remain constructive, despite the challenging economic backdrop.

Under a second Trump administration, McPherson and Pelaez anticipate a continuation of the tax cuts, deregulation and deficit spending that characterized the president's first term in office. While they caution that the ultimate economic impacts remain uncertain, particularly around the inflationary effects of potential tariffs and a wider deficit, the mining industry could be a clear beneficiary.

In particular, the hosts expect the permitting process for U.S. mining projects to be streamlined, either through executive orders or by ceding more authority to state and local governments. This could be a game-changer for projects located in traditional mining jurisdictions like Arizona, Alaska and Nevada, where complex and lengthy permitting requirements have been a key obstacle to development.

For investors, the current tax loss selling season may offer attractive entry points to gain exposure to these themes. As investors sell underperforming positions to offset gains elsewhere in their portfolios, junior mining stocks often experience sharp, indiscriminate declines in November and December before recovering in the new year.

Several U.S.-focused developers and explorers were highlighted that they believe are well-positioned to benefit from the expected policy tailwinds, including Arizona Sonoran Copper (ASCU), AngloGold Ashanti (AU), Troilus Gold (TLG), and Silver47 (AGA). They also see the potential for increased M&A activity as larger producers look to take advantage of the improved operating environment to boost their project pipelines and growth through acquisitions.

While acknowledging the risks and uncertainties inherent in the space, the hosts make a compelling case for the role of gold, silver and copper in a diversified investment portfolio. With valuations at attractive levels and the potential for meaningfully enhanced economics under a more supportive regulatory regime, U.S. mining equities could offer significant upside for patient, long-term investors.

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