Marin Katusa, author and founder of Katusa Research, is an expert in the natural resources space, focusing on gold, oil, uranium and other metals. Over the years, he has helped arrange more than $2 billion in financing, making him one of the most knowledgeable and well-connected natural resource researchers in the world. He joins the ETF Think Tank to discuss the recent rallies in copper and uranium as well as opportunities within the sector.
The discussion starts with copper and its recent 30% rally off the February low following an extended dormant period. Is it an anti-dollar play or an AI play? Katusa believes that it is a genuine supply & demand issue. He notes that everyone is talking about higher costs across the board, including cost of living increases. The production of trucks and other infrastructure is all helping to drive copper costs. Saudi Arabia is building out its future. China is building out its future. The demand for industry and the materials for it is there and increasing. The people who refine copper are telling us that re-industrialization is real and there’s strong demand.
With respect to the uranium market, Katusa believes that this is an easier area to operate in, but you have to know what you’re investing in. Right now, he wouldn’t touch anything in Africa because why should somebody need to go to Africa for investment when the opportunities are already here at home? He wants his investments to be very straightforward and developed. He’s looking for projects that are permitted, largely built-out and low cost. He doesn’t want companies where they’re messing around with things like corporate sponsorships. In the end, he sticks with management teams with skin in the game.
When it comes to the broader idea of what to look for when investing in a project, Katusa says that you need to decide what kind of investor you want to be. In many cases, you need to learn as you go when you’re starting, but eventually the experience will come. In general, if you build it to sell it, you’ll keep it. If you build it to keep it, you’ll sell it.
The decision of when and how much to invest in a project can be a tough one, especially when the outcome isn’t clear. If the cost/benefit analysis is starting to move in the wrong direction, Katusa believes you need to be honest with yourself and ask if you made a mistake or at least identify if something has changed. If something wasn’t wrong, was it something such as the financials & logistics that didn’t work out? He offers a personal example of how one of his projects was delayed by 6 months because an engineering firm screwed up. You’ve got to take the risk sometimes, but you need to make sure that all the t’s are crossed, and i’s are dotted. If something fundamentally changed, you may need to suck it up, take the tax loss and move on.
Where does Katusa see opportunities today? He currently has large positions in gold, copper and lithium. He thinks geothermal is interesting and sees some opportunities in base load power and carbon credits. He is a bit worried though because the current environment feels a little like 2006-2007, which featured 18 months of higher for longer interest rates before the housing market blew up and ushered in the financial crisis. If rates remain elevated, someone is going to get hurt and it could be retail more than commercial.
Other key takeaways:
- In general, know your risk and play within it. If you’re looking only for straightforward exposure to a commodity, such as uranium, stick with an ETF.
- When it comes to investing in natural resources, it’s important to just get in the game. You don’t need to be the most experienced person in the world. You can find so much information so easily nowadays. You just must put the effort in.
- Never bet against American ingenuity. You don’t need to own 15 companies in order to be successful. You can choose a couple of winners with the lowest cost to produce, and you’ll end up doing fine.
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