Resource Roulette: Value in Mineral-Rich Congo? – Fat Tail Daily

I’ve got an interesting article to walk through today:

Rwandan-backed rebels entered Congo’s Goma in a major escalation.

If you can’t get behind the Reuters paywall, here’s a brief summary:

The article details last week’s escalation in violence across the Kivu Region in the Eastern Democratic Republic of Congo (DRC).

An area with incredible natural beauty, volcanoes and mountain gorillas.

But for years, it has been a hotbed of ‘off and on again’ conflict between the Congolese military and M23 rebels, which the UN claims is backed by Rwandan rebels.

So, why could this have implications for the resource market?

Mining Memo’s Take

You might already know that the DRC is rich in copper and cobalt. But those deposits are located in the south, a long way from the conflict happening in Kivu.

But as you head into the dense jungles of the Eastern DRC, you’ll enter a region known for its prolific ‘3T Minerals’.

That is… Tantalum, Tin, and Tungsten.

The Eastern DRC is a major source of the 3 T’s.

In fact, one Canadian-listed producer, which we’ll detail below, is responsible for about 7% of global tin production!

I had the chance to visit this region back in 2011.

A friend of mine, who ran a tourism business out of Jinja in neighbouring Uganda, lent me one of her 4WDs, which I drove around the country as a ‘self-driving tourist’.

I planned to leave the car at the border, cross into the DRC, and visit the mountain gorillas with a tourism operator.

That was back in my more intrepid travelling days, well before I had kids!

But back then, the Eastern DRC was also heating up. Confrontation was building, and I decided not to visit Kivu.

And just like today, I believe higher commodity prices were the primary cause of the rising conflict.

You see, we’ve entered a period where minerals and energy are becoming the precursors to conflict worldwide.

As I’ve pointed out, resource nationalisation and war in mineral-rich regions tend to escalate with rising commodity prices.

Just as investors become more bullish on the long-term resource outlook…

So do governments and military groups!

For better or worse, they’ll look to capture a greater share of that wealth, whether that’s through higher royalties, outright nationalisation or, in the case of the DRC, military intervention.

These are all warning signs for international miners (and their investors) who have spent years developing projects in relative peace and subdued commodity prices.

But the situation is changing, and knowing where you’re invested has never been more critical.

Companies CAN and DO lose mines, which can have a terminal impact on the stock.

And I don’t believe investors are paying enough attention to what we call jurisdictional risk.

So, what’s the implication?

Case in point…the Canadian-listed tin miner I alluded to earlier.

Geologically speaking, Alphamin Resources [TSX-V:AFM] probably holds the world’s finest tin deposit and is a major global supplier.

But you can’t move the rocks… Not quickly, anyway!

After investing heavily in the Kivu region, Alphamin’s flagship asset now sits in no-man’s land amid intense fighting between two military groups—a nightmare outcome for its shareholders.

And of course, the millions of innocent people living here.

I believe mining nationalisation and mineral conflict will only escalate from here.

That means you should evaluate your stocks and whether they’re located in places with a history of conflict or resource nationalisation.

But there are opportunities, too…

Valuations on stocks with exposure to tantalum, tin, and tungsten (in safe locations) have the potential to re-rate.

That’s because jurisdictional risk will manifest into a REAL risk as the commodity cycle turns and prices rise.

Stay tuned as we explore some of these opportunities over the coming weeks.

Regards,

James Cooper,
Editor, Mining: Phase One and Diggers and Drillers

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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