Navigating Metals Markets in 2025

Podcast Transcript

Ed Coyne: Hello and welcome to Sprott Radio. I'm your host, Ed Coyne, Senior Managing Partner at Sprott. I'm pleased to welcome back two of our regular guests, John Ciampaglia at Sprott Asset Management and Per Jander from WMC. John and Per, thank you for joining me today on Sprott Radio.

John Ciampaglia: Great to be back.

Per Jander: Thanks, Ed.

Ed Coyne: Gentlemen, I know Per; pretty much every time I speak to you, you're somewhere else in the world, and this last week, you were down in my neck of the woods in Florida at the BMO conference. John, you were there as well. I thought it would be interesting for our listeners to get a general idea of some of the themes and topics being talked about and the enthusiasm level as it relates to mining in general. John, let's start with you. What were some of the general themes that you were impressed by or taken back by as they relate to BMO last week?

John Ciampaglia: Sure. For those who don't know, Ed is referring to the Bank of Montreal. It is their mining and critical materials conference, which they've held for many years. It's one of the largest in the world. About 2,000 participants attend, including institutional investors from around the world. Over the two and a half days that our team was there, I think we had about 40 meetings with different institutions.

My first comment is that interest in global mining remains very high, hence the high attendance. I heard there were 400 people on the waitlist to attend the conference. Really strong interest in mining. This was not drawing the same amount of institutional investors even three or four years ago. I'd say that's probably a strong and supportive sign. This year, the theme of the conference, I would say, was the renewed interest in gold, and the last two years were in the shadow of other things like lithium, copper and uranium.

This year, with gold hitting all-time highs in U.S. dollars, has captured a lot more attention. That was very positive because many of the gold miners who have been tenants for the last two years were struggling to generate interest in their space. We were there specifically for uranium. Naturally, the conversation crossed a number of metals, given the interest in gold and how much Sprott manages in that category.

The general theme related to many industrial commodities, including uranium, is uncertainty. Many political and geopolitical factors affect these markets. Uranium, copper, steel, and aluminum are getting entangled in many different items. This includes everything from the threat of tariffs, retaliatory export taxes, changes to the Inflation Reduction Act and the loans program office in the U.S., which is, I think, giving utilities another reason to pause.

Then there's lots of chatter about how the relationships between Russia and the U.S. may be evolving and how that may be affecting critical markets like uranium—a lot of questions and, unfortunately, a lot of uncertainty. With uncertainty, I always say it's worse than bad news. It just paralyzes market participants. That's what it feels like we're in right now: a state of sitting on the sidelines waiting for more clarity.

Ed Coyne: That uncertainty, is that, in your mind, what's driving maybe gold over and above, say central banks buying? Is that putting wind in the sails?

John Ciampaglia: I think it's a good point. If you think about gold hitting all-time highs in U.S. dollars, we think of gold as a safe haven asset, given how it has historically performed in different turbulent market situations. The parallel we like to consider is almost like paying an insurance premium. If you think the risk of something happening is going up, you'd be willing to pay a higher premium for that protection. That is one of the key drivers of gold going up.

Market participants are reassessing many of these geopolitical factors, the uncertainty related to them, and the impact they may have on several different asset classes. People are thinking much more cautiously about equity, bond, currency, and commodity markets, and we think that's one of many drivers helping to support the price of gold.

Ed Coyne: Per, let's bring you into this on the uranium front. You spent a lot of time globally looking at, acquiring, and helping Sprott along the way with uranium. Is that uncertainty filtering into the uranium markets? What's going on? Maybe help the listeners understand the difference between what's happening in the spot market today versus the term market and walk us through that as well.

Per Jander: It certainly is affecting uranium in a very big way because I think few fields are as dependent on geopolitics as the nuclear fuel cycle and the nuclear fuel industry because they are so globally connected. Mines are in one part of the world, and they are converted in one part. Then, it's enriched somewhere and put into a fuel bundle. There's a lot of logistics going on there, and it's being heavily affected by all these recent developments from a geopolitical standpoint.

A good place to start is to point out that there's a lot of talk of Russian uranium. While there is such a thing as Russian uranium, it's Russian-enriched. Russia is not even self-sufficient when it comes to natural uranium, the stuff you get out of the ground. They need to import that in order to have feed for their conversion service and enrichment facilities. Russia provides a lot of conversion and enrichment to the world, and that's where the focus went. Whenever there's uncertainty about the supply from Russia, utilities are going to focus, and that's where they have focused over the last few years.

There's so much uncertainty around the Russian products—are they going to flow, are they not going to flow? If you're a utility, you run to cover yourself in that area and then worry about the uranium concentrate and the use of your weight aspect at a later stage. If we look at price development, its conversion and enrichment have gone four or 5x over the last few years, and those prices are not coming down. At the same time, uranium is at these levels, at least a spot price where we're probably not that far above where we started when the war broke out.

There has been a lot of volatility, but the volatility in the spot market is more dependent on the lack of buyer activity, whether from utilities through to John's point or simply staying on the sidelines right now because there's so much uncertainty. Or you just want the smoke to clear essentially, but then it keeps getting more smoke. It's like someone in the wild has a bit of a smoke machine right now. Hopefully, that's going to clear at some point, but I also think it's a conscious effort to disturb the playing field a little bit and set the stage for negotiations that will happen in the next few months.

You look at the term price itself; it's gone nothing but up or held firm, at least. Sure, it's gone down a dollar or so, maybe because of a junior miner who probably doesn't even have an operating mine that felt like they had to drop their prices a little bit to get a contract over the line. Overall, the term price has gone nothing but up and is currently holding firm. You look at the spot price at $65; now we have a spread of $15. That is in the realm of where you can make a carry trade work.

You buy in the spot market, finance the material, and sell it to utility further out in time. Now, you're starting to see a connection between the term and spot prices. As the term price is holding firm at $80, the pressure is going to come to the spot price. It has started. We've seen at least a stop in the fall of the spot price. It's holding firm at $65 now, and many transactions have been there. I honestly think that prices will turn around in the coming weeks.

Ed Coyne: That's good insight. You would think that with everything going on from an uncertainty standpoint, the price would be going higher. It seems a bit confusing to a lot of our investors. The long-term story for uranium has only gotten better, yet the supply side is getting more constrained. Help us make sense of that because that seems to be a confusing thing for a lot of our investors right now. They buy into the supply-demand dynamics, and the supply is getting constrained, but the price isn't reflected in that. What's going on with that?

Per Jander: One aspect that people tend to forget about anyway, and it's a unique aspect for the nuclear fuel industry in itself, is that the lead times are very long. When you buy uranium, you take delivery a year out, but the uranium you take delivery of does not go into your reactor for another three or four years. There's a lot of inertia in the flow of nuclear fuel from the miner by the time it gets into the reactor. That automatically gives the fuel buyers some time.

They're very rarely pushed into a corner. Overall, not all fuel buyers act the same. The situations are different from the various utilities, but as an overall trend, they normally have a little time. They can't wait forever, and there hasn't been a replacement rate contracting for a very long time now. Clearly, at some point, that time will run out, but they do have a little time. For right now, they don't have to rush to the market. They can sit back and wait things out. They're not extremely price-sensitive.

By all means, I'm not saying they don't care if uranium goes up or down $20. Of course, they do, but the bottom line of their operations is not going to be that heavily affected because the portion of uranium in operating costs is so small that it's not going to cost you to shut off your reactor just because uranium prices go up a little bit. Those two factors are the main reasons utilities can afford to wait a little bit. They don't have to catch the absolute bottom. It's more, to John's point, uncertainty is worse than actually bad news. They just want some kind of certainty, and then I'm pretty sure we'll see a few of them spring into action.

Ed Coyne: Thank you. John, are you seeing anything, or is there any additional color you can add to that because you sit on a different side of the table as far as the types of investors you're talking to? What's the general feeling out there right now?

John Ciampaglia: I would say the general feeling right now is one of frustration because people are looking at the longer-term supply-demand fundamentals and saying it has only strengthened over the last 12 months. How do we make sense of two key dynamics they're focused on? One is, why have the utilities dragged their feet on getting back to replacement rate contracting, given all the positive momentum around the nuclear renaissance?

The new energy secretary of the U.S. has done multiple interviews publicly saying this nuclear renaissance is a priority for him, President Trump and this administration. The term price, as Per said, went up about 20% last year. That's a very positive signal. The contracting didn't quite match as utilities balked at the high prices and then got distracted with other things. Then, it's been very volatile on the spot price, which again gives us a very different price signal.

Last year, over the course of 2024, we probably averaged about $85 per pound. We ended the year around $70, and now we're sitting at $65. People are saying, what signal is that sending me right now? I think our message is sending a lot of noise that the differential between the spot and the term price to us seems out of whack. I thought it was interesting. One of our longtime institutional uranium investors, in one of our meetings at the conference last week, said for a market that's in a structural supply deficit state like uranium is right now, the fact that term is $15 a pound more than spot didn't make any sense to them. We would agree with them.

What's happening is people are fixated on the spot price, trying to decipher what signal that is sending. Is it a real signal, or is it noise? One of the things we talked about last week at the conference is a factor that we think exacerbated some of the downward selling pressure in the spot market. That is our belief; we can't completely confirm it, but we believe that a Kazak-domiciled physical uranium fund went through a liquidation process at the end of last year and perhaps even into this year.

This was a state-sponsored fund that was created a few years ago. The strategic objectives of the fund no longer apply. We believe that a little over 2 million pounds was cleared through the spot market, which weighed on the market as the market knew it was coming. It happened at a period of time when markets were generally less liquid. Then, the other thing I would say is if you think about the point I made earlier about the spot price averaging about $85 last year, what’s interesting is that you'd have to think about the incentive that participants have to buy at $85.

If you think about producers, which traditionally would always come into the spot market to backfill some of their inventory, what incentive would they have to deliver uranium at $60 and buy it in the spot market at $85? The answer obviously is none. They were very quiet last year, and we just got the numbers from one of the trade publications that indicated that producers bought 1.9 million pounds in the spot market last year. For context, they bought 6.9 million pounds the prior year and 10.9 million pounds the year before. The producers disappeared as the spot price raced ahead of term.

Then, if you think about utilities, they weren't buying material in the term market. They have very little incentive to buy in the spot market because of how they contract; there is no urgency there. Last year, we saw at least two market participants step away due to high prices. Financial players, I would say, were less active last year. In hindsight, in the absence of those buying groups and a bunch of material hitting the market, I'm not surprised that the price was a little soft in the fourth quarter at the beginning of this year.

Ed Coyne: Any conversations around copper? You're seeing more things happen in the copper market. More people are talking about it. Was this mostly a gold and uranium narrative at the most recent conference, or was copper part of that conversation as well?

John Ciampaglia: It's interesting because they do an institutional poll at the conference, and they ask all the participants: What metals are you the most bullish about in the next 12 months? Interestingly, the poll results were split evenly between gold and copper. We talked a bit about gold and the bullish dynamics that are playing out right now. Copper, even though the prices have meandered around a little bit, people remain constructive.

I think the reason for that is that people are looking at more of the medium and long-term dynamics as opposed to the short-term noise and saying that the fundamentals for copper remain incredibly robust, given many believe we will have a supply deficit in the next one to two years. I think many people realize that this whole energy addition that we often talk about, this incredible need for more electricity, not just from emerging economies but from developed economies, copper is the key metal. Anything to do with electrification and moving electrons, copper is the go-to. I think copper remained resilient even though it was getting entangled in all of the threats of tariffs. The Chinese economy has been mixed, but copper, I think, medium to long-term, has a very strong story intact.

Per Jander: I can chime in on that too because normally I'm not the copper expert, of course, but I went straight from Florida up to PDAC, so I'm in Toronto right now. I was speaking at a session yesterday on uranium, but there were also a lot of copper and gold discussions there. One of the speakers was Mike Henry at BHP. Again, I don't listen to copper presentations that often, but he said something that resonated with me, with a 70% demand increase by 2050. In the next five years, he said $250 billion of investments is needed just in the upstream alone.

There is an enormous amount of investment. BHP is doing what it can, but there's a call to power everywhere. Considering where this society is going, not just for AI purposes but electrification everywhere, there is an insane demand for copper. They had a similar poll asking a room of maybe 500 people what they thought about the next 12 months concerning copper, gold, and uranium prices. I think it was more than 60% on copper and about 20% on gold. Those were the two leaders, at least—clearly, a lot of belief in copper. No doubt.

Ed Coyne: I read something recently. No matter how you're producing energy, you need copper, period. Whether it's wind, solar, nuclear, oil and gas, or coal, it doesn't matter; copper has got to be part of that. A 70% increase in demand by 2050 is a staggering statistic.

Let's shift gears a little bit. We're talking a lot about the physical metals right now, and I think that drives most narratives, but the miners are starting to get a little bit of love, and I say that because they've been unloved for a while. There's been a big disconnect for a long time. John, let's start with you and talk about miners in general on the precious metal side. What's happening on that side right now? What's the theme?

John Ciampaglia: I'd say the theme is improving sentiment. That's positive because last year, there was a mixed sentiment. The reason is that you had an incredibly strong year last year for the price of gold but very mixed results in terms of the gold stocks. I think what was an overhang on the market was the two largest miners in the world, Newmont and Barrick, last year; their stocks underperformed the price of gold. When the price of gold is up 25%, you would expect those stocks to do well. They did not; they underperformed.

They underperformed for company-specific reasons, whether geopolitical issues at Barrick or cost-related issues at Newmont. The market expressed its displeasure with those two companies not providing the operating leverage you would expect. I'd say that the sentiment is starting to change. I think some of the issues they faced last year are improving in terms of the outlooks. We have seen a much better performance of the gold stocks relative to the metal.

This is the big challenge for these gold stocks: they need to deliver that operating leverage. What's the reason to invest in them if they don't? That's the big challenge. The path of least resistance is to own physical gold. There's a big challenge and opportunity here for these gold and silver mining companies to deliver better results. So far, investors are responding to the current messages in outlooks that they're sending.

There's going to be a bit of a lag effect. Still, we had conversations with many institutional investors at the conference who said they were thinking about physical gold and related equity. That's a good sign, but I think some of these gold stocks right now are in the "Show me, prove it to me" camp. Sentiment has clearly improved, and relative performance has improved.

On the critical mineral side, obviously, the equities have struggled. In the last few months, the uranium stocks have come off with the slowdown or the uncertainty strangling the uranium market—the same thing with copper. Everybody's waiting to see how exactly these businesses and these business models are going to be impacted if there's a 10% or 25% import tariff. That could have a meaningful impact.

We've seen it play out in the physical market; there is a rush going on right now to transport some of these physical metals from Europe or Asia into the United States ahead of potential tariffs. That is obviously creating a big distraction and an arbitrage that people are trying to capitalize on. As you would expect, some of these stocks have been performing alongside the underlying commodity prices, which have been soft.

Ed Coyne: We haven't talked a lot about silver. Silver seems to be stuck between the monetary side of things with gold and the critical material side as it's used in more and more things like solar and whatnot. Is anybody talking about silver at all as it relates to the physical and the miners?

John Ciampaglia: I think most investors, I'll start with institutional ones anyway; they're captivated by gold right now just because of the unique attributes it could play in their portfolio in terms of risk management. Again, we talked about some of these risks earlier. There is a link between gold and silver. That gold-silver ratio right now is very high, meaning silver has lagged and has not kept pace with the appreciation of gold. I often remind people that it's one of the few commodities still far from its all-time high, well over a decade ago.

Silver has a lot of catch-up in our minds to play. What is not propelling it higher is its dual purpose of being a monetary and hybrid metal. It feels incredibly cheap to us relative to gold. One thing holding silver back is that you don't have the central bank buying like you do with gold. That is a big buying group. Now, what you have in silver's favor is a big buyer group of industrial users, things like solar and electronics. It's like the industrial against the central banks. That's the big delta around the different buying tension. Unfortunately, it feels like silver's being weighed down like copper and uranium in terms of its industrial qualities.

Ed Coyne: Our listeners are listening to your comments and thinking, "How can I participate as an investor?" Do I just stick with the physical and ignore the miners in general, or is there finally an opportunity for these miners to do quite well in the future?

John Ciampaglia: On the mining side, putting aside who's paying more for tariffs, the prices right now are quite attractive. It feels as though a lot of the cost inflation these mining companies have endured over the last few years is starting to stabilize. That's when you would expect higher commodity prices to be able to trickle down to their bottom lines. The opportunity that the miners provide is that operating leverage lift that they historically have provided against the physical commodities themselves. Sentiment around the miners seems to be better, perhaps less sensitive to some of the geopolitical tariff talk. The miners aren't taking a discount for the metal they're selling. It's the buyer who's going to be paying more for the metals.

Ed Coyne: Let's think of that from an investor standpoint, then. Let's just use an example. You got $100,000 to invest in the market, and you're going to put maybe 10% in precious metals, A, to help offset some volatility, and then B, to be opportunistic about growth potentials in the miners. Again, we're not recommending this in any way, shape, or form, but how should someone think about that? Is it a simple 50/50 split, half your money in physical, half your money in equities or miners, or how should you think about that from an investor's point of view?

John Ciampaglia: It's a good question, but it's also challenging because it's not a one-size-fits-all answer. At the end of the day, equities are equities, even if you're gold equity. If a broader equity market sells off, we've seen historically that gold stocks will go with it, and in the short term, even physical gold will go with it. It is interesting to think about allocating some percentage of your overall precious metals weight to the equities right now, which looks much more attractive.

From a valuation and cost structure perspective, things seem to be leveling out, which is very important. The risk-reward ratio looks more favorable than it did, say, 12 months ago, when I think some of these gold mining stocks were still struggling with cost overruns and overall inflation in their supply chains.

Ed Coyne: I always like to say physical first and equity second, as far as how you think about portfolios. Is that fair to say?

John Ciampaglia: Yes. I like to think of it as a pyramid with physical gold at the base. It forms the foundation. Moving up the pyramid to the point where you can get more creative with equity exposures, whether it's all-cap, large-cap, small-cap, or whatever. The fundamental is the physical because it provides your portfolio with the most unique diversification attributes relative to other asset classes. I think that's why gold has stood the test of time, has been considered a store of value for millennia, and will continue to play an important role in an overall diversified portfolio.

Ed Coyne: Well said. Per, on a critical material side, specifically uranium, how should investors be thinking about that? You've mentioned that at $65 a pound, a lot of these miners are probably not getting paid appropriately to pull it out of the ground. How should investors think about the physical side from an investor standpoint relative to the miners?

Per Jander: Looking at uranium alone on where the spot price is right now, I'll preface this with that I've always said it before: at higher levels, too, I didn't see much downside, and here we are lower anyway. I think we've talked about some of the reasons for the lack of buyers and certainly from producers, utilities and one-offs like the liquidation of funds, that it just feels like $65 is not sustainable. Whether you go into the miners themselves or the physical, I would say the outlook is more or less the same. Could it be more leverage on the miners? For sure, because they are riskier, just like John just pointed out.

I talked to one investor that's been around for a long time. He looks at it like it feels like it's a big coil just being wound up, and at some point, it will let go. It's being held down by all this uncertainty and smoke that's going on right now, but at some point, it will give. The fundamentals are all pointing in one direction, and it needs to let go at some point. It's just a matter of when and how fast it will be.

John Ciampaglia: Maybe to add on that, we've heard from companies like Cameco in the last few weeks say they've stepped back from contracting because the utilities are expecting lower prices, and they're not willing to budge. It is starting to have an impact in terms of that term market. We've also heard some stories about some of the development projects that are taking a pause here because the prices just aren't there to support the upfront CapEx to get these projects going. That's the big challenge. That's why we've been saying for several years now that the dynamics over the next four or five years look very positive.

Given the long lead times to bring new projects to market and some of what we believe are real supply chain challenges in Kazakhstan, we just don't see where this big supply response is coming from. If you've got a time horizon that's in the two to four-year range, we remained constructive. I think one of the challenges is that last year when the price of uranium broke $100, it attracted a lot of very hot transitory hedge fund money. We think that money has long gone.

It's gone on to other things. It's chasing AI and other things. It feels as though it has flushed through. What was interesting at the Bank of Montreal conference was that probably about 20% to 25% of our meetings were with institutions that we had met for the first time and were still pretty early in their work process. Maybe this pullback we've seen in the last few months may be an interesting entry point for those who missed the first part of the bull market.

The other thing I would say is, just like with copper, the producers are all saying we need a lot more production, but the production won't come unless there's incentive pricing. Right now, the price of copper does not reflect an incentive price at $4 and change per pound, and the spot price of $65 does not incentivize new developments unless you've got a high-grade project somewhere. We run the risk that this supply deficit situation will just become worse if prices remain too low for too long.

Ed Coyne: It seems that patience will pay, and to your point, the hot money that drove the price up originally seems to be on to other things. You're super connected to that narrative, that storyline, who's coming and going within the finds. Does it feel that the more long-term, patient investors are starting to circle this narrative and look at it for the first time in a meaningful way? Is that your general sense, or are we still early with that?

John Ciampaglia: We sense that a large number of our existing institutional shareholders are confused and frustrated, but they're largely staying the course here in terms of focusing on the mid to long-term fundamentals. They realize the market's going through an air pocket here of uncertainty mostly driven by tariffs, trade policies, and geopolitics and that they're trying to look through that. Yes, it's not fun going through. The folks we've talked to believe in the long-term thesis and are largely staying the course.

One of the questions we get regularly is, what catalysts are coming up that are going to change market dynamics? We've always said to people that it is a very catalyst-driven market, and they're very hard to predict because they're not schedule-based. They are very specific issue-driven, meaning the Japanese suddenly announced they're going to restart more nuclear reactors, or the World Nuclear Association put out a new demand forecast.

Those kinds of events have acted as catalysts to give market demand signals to investors to act on. It is a lumpy market in terms of these price signals, and it's very hard to predict where they will come from, but historically, they always come. Some of them are supply-driven, and some of them are demand-driven. You just have to be patient and wait for them because the nature of this market is we go through air pockets where there isn't a lot of news flow, and everybody's just wondering what's next.

Ed Coyne: Well said, John. Any last parting thoughts before we sign off today?

John Ciampaglia: I would just echo that we are equally as frustrated with some of the price action we've seen on the spot side. We are doing our best to look through that and focus on the longer-term fundamentals, which have not deteriorated whatsoever. Yes, the trade dynamics are creating a lot of confusion and uncertainty. Still, for investors that have more than a few weeks, which seems to be the norm today in terms of time horizon, many investors, I think there's a very interesting setup here.

Ed Coyne: Gentlemen, it's always great to have you on Sprott Radio. Thank you for your insights and thoughts. We'll check in towards the end of the year and see where we stand. I think many investors are keenly interested in this right now: the directional moves in both the physical markets and the miners themselves. Thank you all for listening today. Once again, I'm your host, Ed Coyne. Thank you for listening to Sprott Radio.