Thursday, 13 April 2023 — Melbourne

By James Cooper Editor, The Daily Reckoning Australia

[8 min read]

Dear Reader,

Europe is famous for a lot of things.

French wines from Bordeaux, Schützenfest in the city of Hanover, the annual Eurovision song contest, posh cars, and eccentric politicians.

But mining? Not so much.

Extracting resources from the ground is a dirty business in Europe.

For Europeans and their politicians, it’s very much…‘not in my backyard thanks!’.

Political leaders have shunned new projects thanks to the industry’s poor public perception and often damaging effects on the landscape.

Instead, Europe has preferred to source the raw materials from out of sight places like Africa, Asia, or South America.

But European nations have a long, torrid history of pulling natural resources from faraway lands…

Belgium has bloody colonial links with the Democratic Republic of the Congo (DRC). Tapping into the country’s vast mineral wealth and producing agricultural products like cotton, cocoa, and coffee.

The French, too, plundered much of West Africa’s natural resources throughout the 1800s to the 1900s…

Meanwhile, Britain raided the copper rich provinces of former colonies in Rhodesia for its own economic might.

Then there’s the Spanish and Portuguese conquistadors…

These looters raided South and Central America for its rich gold, silver, and copper deposits as far back as the 15^th and 16^th centuries.  

For centuries, European colonialism has been built on the premise of taking mineral wealth from subordinate lands.

Years of forced slavery, violence, and economic submission has left these former colonies in a state of perpetual decay.

War, dictatorships, corruption, and bribery are now endemic in many of these backwater nations…that’s thanks to a long bloody history of colonial powers exploiting their mineral rich lands.

While colonialism officially ended around 50–60 years ago, it soon emerged in a new more politically acceptable form…‘neo-colonialism’. 

With established connections in these former lands, European nations (as well as the US) set about enterprising the mineral rich grounds, while offering extraction rights to multinational companies that would play ball on ensuring supply (and profits) would keep pouring back to the West.

Despite colonialism officially ending, mineral rich nations across Africa and South America received little benefit for their country’s bounty.

Indeed, the supply chains continued to flow (post colonialism) for decades, allowing the West to build its might and dominance in the global economy.

Securing commodities was key.

But…

There has been a disrupter evolving over the last 20 years, which has flipped the status quo on the West’s former dominance of these supply chains…

China.

The early 2000s witnessed the emergence of China and its focus on securing raw materials.

With rampant economic growth, China quickly exerted its influence over mineral rich backwaters across Africa, redirecting the bounty from the west to its own shores.  

Over the last 20 years, China has emerged as the most influential foreign power in these mineral rich regions…this has handed China enormous strategic power in the global economy.

Over the last two decades, China has steadily taken market share away from the West and now dominates the periodic table of elements…lithium, cobalt, rare earths, copper, and graphite among others.

It’s why China now holds the ace card in the global race for critical metals for both extraction and processing.

So, what’s left for Europe?

The West will be reeling from its gross underestimation of the importance of commodities and their critical role in economic strength.

Commodities sit at the core of a major power shift from West to East.

So much so that the West may have to bow to China’s demands in coming years…after all, commodities are the lifeblood that feed economic growth.

China has blindsided European and American powerhouses by repeating their colonial playbook.

For decades, manufacturers in Europe grew plump on unfettered supply of raw materials flowing from economically deprived countries across Africa.

With much of this supply now falling into the hands of China, Europe’s political pull on the global stage has been weakened.

Already, signs ARE emerging that Europe’s political leaders will bend to Chinese pressure.

Last week, French President Emmanuel Macron shocked Washington after suggesting Europe must avoid getting in the way of China’s ambitions to take back Taiwan.

It was on the back of Macron’s smiling and back patting visit with Chinese President Xi Jinping.

France is NOT an economy endowed with mineral wealth…like much of Europe, its future hinges on the ongoing supply of critical metals coming from China.

No doubt Macron’s comments will be music to the ears of Chinese leader Xi Jinping.

But as a major importer of Chinese commodities, Europe will be in a politically weak position as tension builds between China and the US.

On the one hand, it must stay on friendly terms with the US. A strong military alliance will prevent Russia’s bigger ambitions that might extend beyond Ukraine. A strong US backed NATO is key to this.

On the other hand, its economy cannot function without the supply of Chinese sourced commodities.

Any European push back on China’s Taiwan rhetoric AND China could snap back with harsh trade restrictions.

The old economy is very much stuck between a rock and a hard place...

In a reflection of the seriousness of the situation, for the first time, the European Commission is looking to unlock its own supply of critical metals.

It’s an unprecedented move.

Unthinkable in the dark days of colonialism, where European countries sourced most of their raw materials from faraway lands.

But it’s a decision based on sheer need…Europe has lost much of its former colonial influence in these mineral rich nations…China controls those supply chains now.

No longer does Europe have the luxury to say ‘not in my backyard’ anymore.

That’s why, on 16 March 2023, the EU announced it would look to fast-track mining approvals and incentivise developers operating on European soil.

In fact, the EU has set an ambitious target of 10% for domestic supply of all its critical metal requirements.

Of course, that’s only a small fraction…90% of its critical metal needs will continue to be imported.

Europe’s failure to secure critical metal supplies…two strategies to play it

Australian and Canadian producers are well positioned to benefit as geopolitical tension heats up.

Both countries offer stable and secure supplies that fall outside of China’s dominance.

Quality developers with critical metal assets are set to reap handsome returns as European manufacturers scramble for alternative supplies.

Developers with large, high-grade deposits will benefit the most.

At Diggers and Drillers, we have accumulated a diverse basket of critical metal stocks set to benefit from fragmented supply chains.

Several of our picks have already been beneficiaries of attractive offtake agreements with European, US, Korean, and Japanese manufacturers.

But there is another way to play the EU’s heightened anxiety…

Invest in companies looking to develop critical metals on European soil.

For decades these projects have been mired in uncertainty.

Despite some company’s owning quality assets, critical for Europe’s renewable energy transition, anti-mining lobbyist continue to pull sway over political leaders and public opinion.

But it seems EU leaders are now more worried about the future supply of critical metals.

It places explorers and developers across the region in a unique position.

Acutely aware of the value of raw materials, European investors will be keen to ride the success of these projects.

Given the changing tide among EU states, these developers will also benefit from government support in the form of financial incentives and new powers to cut through the vast red tape that currently exists.

It’s a reason we will be adding high quality European-based mining stocks set to benefit from the EU’s push to build-up its domestic supply of critical metals.

By subscribing to my service, you will have first access to these recommendations.

You can find out more here.

Until next time, have a great week.

Regards,

James Cooper,
Editor, The Daily Reckoning Australia

By Bill Bonner Editor, The Daily Reckoning Australia

Dear Reader,

Yesterday, for no apparent reason, our computer stopped working. It wouldn’t turn on. We pressed the button…we held it down…we punched it. We prayed. We rocked the computer back and forth…caressed it tenderly…then gave it a whack and made sure it was fully charged…

But what could we do?  

The tools of the modern age are black boxes. You can’t ‘open the hood’. You can’t tinker with a silicon chip. You can’t do anything. If they don’t work, you are SOL.

Back in the ’60s…if something didn’t work, we would take it apart. In old cars, for example, you could disassemble the carburettor, clean it…and put it back together. So too, the ‘points’ could be bent a little…cleaned with steel wool…and returned to service. Spark plugs, same story. And you could take one out and see for yourself if it was sparking.

Then, you checked to see if the fuel was getting to the engine. Was the fuel pump working? It was easy to find out…just disconnect the fuel line and turn the key…the fuel should come spurting out. Were the filters clogged? Just take a look.

If you had fuel…and you had spark…something was going to happen.

No spark

But yesterday, we had neither fuel nor spark. Well, we didn’t know what we didn’t have; it just didn’t work…and there was nothing we could do about it.

The tech fates were clearly against us. For not only did our computer refuse to do its job, the airwaves were suddenly empty too. No signal.  

No signal, no phone. No phone, no internet. No internet, no contact with the outside world. We had been ‘cancelled’…disappeared from active life on the worldwide web.

What could we do, but rejoin the real world?  

We went for a walk.

Antonio was feeding the calves. The ‘chango’ (young man) who usually does the job was occupied with the cattle on the other side of the river. Antonio, the foreman, had to do it himself:

The rolls of hay are tightly wound. So, you have to dig at them with a pitchfork to break some of the hay off, then you put it into the concrete trough. It’s a lot of work, and it must be done twice a day.    

‘Why not just put the bales in the corral and let the calves eat them that way; that’s what we do with the horses?’

‘The vet says it is better this way. We don’t want the calves using their energy to fight with each other. The strong ones will circle the bales and the weak ones – the ones that need it – won’t get anything to eat.

‘They gain almost a kilogram per day…if we feed them right. And then we can sell them.’

We continued our walk…kicking up dust…over a couple of small hills…picking our way through the thorns…and then, on a bluff not far from the main house, overlooking the valley, was what we were looking for — the wreck of a modest dwelling. 

We finished the little chapel on this visit. All that remained was the floor. And for that, we made a cross of super-hard quebracho…laid down a border of stones, set on end…and then filled in with flattish stones in cement.

The effect is not as elegant as we had hoped. The sand was too coarse and left us with a gritty, uneven surface. No matter. We will either get to like it…or put a thin level of pure cement on top, profiled around the stones, next year.

But now, we are ready for another project.

Sleeping rough

When the family came this year, we were a little short on space. One couple…two sons and a grandson…a family friend — all came at the same time. And the nearest hotel is a half-an-hour away.  If any more had come, they would have had to sleep outside.

So…on to the bunkhouse!

We went to explore. Trashy. Holes in the roof. Bent beams. Crumbling adobe bricks. Dirt floor. Perfect! A nice place to turn into a bunkhouse for grandchildren. We have seven of them so far…with another scheduled for 21 April. (Today, we begin our trip back to Dublin to lend support to the family.)

Poking our head into one of the rooms, we spied a huge, black growth on the wall. We were still wondering what it was…moving closer to the blob, which was about the size of a kitchen stove…when we realised we had made a mistake. There was a loud buzzing noise…and we were soon under attack. The bees came at us like kamikaze dive bombers…swooping down…grazing our cheeks and then circling around for another attack.  

In a flash, we were on the move…followed by a swarm of bees. We flashed across the yard, like the British at the Battle of New Orleans, we ran through the briars, and we ran through the brambles…using our hat as a rear guard, swatting at them to keep them away. We dove between two lines of wire fencing and then ran down the hill.

The bees kept after us; we remembered that we kept an emergency shot of epinephrine in the pickup. But none stung. It was as if they were just trying to run us off…to warn us not to come back. We had run about 50 yards, swinging at the air around us…until the last bee finally called off the chase.

First order of business: as soon as the temperature drops…the bees have to go.

Then, when we return next March, we can get to work…preferably with at least one sturdy grandchild to help.

We’ll keep it simple. Rustic. Authentic. Two bunks in one room. Two in the other. Stone floors. Unclad adobe walls. Cane on the roof, covered by mud. A bathroom. A little solar electricity. Piece of cake.

But that is for next year.

With heavy hearts, we leave the valley this morning. Its bright Sun…its eccentrics…its challenges — we will miss them all.  We are headed for Buenos Aires. There, we will meet our old friend, Doug Casey, before leaving for Dublin.

Stay tuned...

Regards,

Bill Bonner,
For The Daily Reckoning Australia