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Interview with Josh Serfass, Integra Resources’ new Executive VP

 
As it has been a while since discussing Integra Resources (ITR.V, ITRG), we caught up with Joshua Serfass. Serfass has been with the company and its…

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This article was originally published by Caesars Report

As it has been a while since discussing Integra Resources (ITR.V, ITRG), we caught up with Joshua Serfass. Serfass has been with the company and its predecessor Integra Gold (which was sold to Eldorado Gold (EGO, ELD.TO) for in excess of half a billion Canadian Dollars) and was recently appointed Executive Vice President for Integra Resources.

We decided to have a chat with this fresh face in the management team to hear his thoughts and opinions, not just on the projects but also on how the company deals with ESG requirements and how it plans on being a good corporate citizen.

Sitting down with Josh Serfass

About DeLamar

Let’s start with the Florida Mountain drill program. We already know the DeLamar and Florida Mountain open pits contain a lot of lower grade oxidized mineralization, and in the past year or so, Integra has been focusing on detecting high-grade zones at Florida Mountain and following the gold mineralization there. You got some really nice headline results out of that with for instance 1.25 metes of 16.86 g/t gold and almost 2.5 kilos of silver and 1.5 meters of 12.9 g/t gold and 1,675 g/t silver. How do these higher grade zones change your approach at DeLamar in general?

You’ll have to remember that this district was first operated as a high-grade, underground operation. After gold was discovered in Jordan Creek in the early 1860s, an impressive gold rush that rivaled the famed California gold rush descended on southwest Idaho. At one time, the Silver City area was home to 12 stamp mills, one of the first phone lines in the State and a small army of miners who produced approximately 730,000 oz Au and 57 million oz of Ag. Below Florida Mountain alone, historic mining produced 250,000oz of AuEq averaging an ounce per ton. Fortunately for us, most of this historic mining occurred on one of the six known veins.

2021 Exploration Designed for Discovery and Near Deposit Resource Growth

Is Plan A still to develop a heap leach operation and subsequently build a CIL plant? Or is that still subject to change depending on how extensive the high-grade zones get, and how the silver price evolves (as using CIL processing will likely triple the silver recoveries)?

The plan is to advance into permitting the scenario that will be presented in the upcoming PFS. This PFS will be relatively similar to the PEA in terms of processing, a heap-leach pad for the oxide and transition material at Florida Mountain and a mill for the sulphide material at Florida Mountain as well some a portion of the sulphide from DeLamar. Recall, the DeLamar sulphide was excluded from the PEA pending more metallurgical work. We now know a portion of that sulphide will be included in the PFS which has the potential to boost the total output and extend the mine life.

What’s new for us (and got us really excited) is the potential high-grade below the existing resource at Florida. As you rightfully point out, there seems to be a lot of potential below Florida Mountain along the shoots and vein structures that were not mined in the early 1900s. To date, Integra has drilled over 90 intersects of +4 g/t AuEq, mostly outside the existing resource envelope. The success of drilling this high-grade mineralization from surface has challenged us to think about how to further drill, explore and potentially wrap a resource around what’s at depth. More to come on this in the future; however, you can imagine what a high-grade resource below Florida Mountain could mean for a project with a mill already constructed in the PFS scenario. In theory, we could displace lower grade open pit mill material with potentially higher grade underground material. To further explore the high-grade potential below Florida, the Company may seek to to evaluate the possibility of transitioning to underground exploration at Florida Mountain if it appears strongly advantageous.

Optionality is the name of the game in our space and the potential high-grade, underground provides another option to the package and could complement an already economically robust project (as presented in the PEA).

Delamar & Florida Mountain

In a January update, you also mentioned you were looking at using agitated leach techniques and high pressure grinding rolls to further improve the economics of the project. What does HPGR consist of, and how could this have an impact on the economics of the project?

We recently announced that crush optimization test work has shown a ½ inch crush outperforms the 2 inch crush we used in the PEA. This is still a relatively coarse crush and a size that can be accomplished efficiency with traditional crushing methods and/or HPGR.

The Company did discuss HPGR in January and it is something we are still evaluating. It is a grinding technology that has been used around the World for quite some time but has been slow to make is way into the US mining sector. Essentially, it allows for more efficient fine grinding at a fraction of the energy requirements needed for traditional crushing. In addition, the design allows for continuous feed of material since there is no loading like that used in a traditional cone crusher. The crushing also occurs without any grinding media so it happens rock-on-rock which is very efficient.  Furthermore, the rollers in an HPGR unit only need maintenance every 12-18 months versus a crusher which is budgeted for 85% availability per year to allow for maintenance. Coeur Mining (CDE), a mid-tier gold-silver producer who owns 6% of Integra, just announced an expansion at their Rochester Mine in Nevada that will include two new HPGR units with the expectation of a  7% increase in silver recoveries due to these HPGR units.

The value and exploration potential of both DeLamar and Florida Mountain has been widely established, but let’s take a minute to talk about two lesser known but prolific exploration targets: War Eagle Mountain and the Black Sheep district. Let’s start with War Eagle. Could you perhaps (very quickly) rehash the 2019 and 2020 drill programs there and what you are targeting with your 2,000 meter drill program this year?

War Eagle is a great target with a fascinating history. History buffs can google ‘War Under the Mountain’ to read about the battle that broke out amongst two mining factions in the 1860s over the valuable gold and silver in War Eagle. Anyway, War Eagle has seen some of the highest grade drilling to date at the project. The plan is to get in there this summer and complete additional fences of drilling to go deeper and test the feeder structures, the same structures that were mined under War Eagle just north of us. With additional successful drilling at War Eagle, we believe there is potential to add another high-grade resource to the project in the coming years.

Another really exciting target for the Company is BlackSheep, a ~35 square kilometer land package northwest of DeLamar along the mineralized milestone corridor. This area was staked in part at the suggestion of Dick Sillitoe and Jeff Hedenquist, arguably the pope and first bishop of epithermal systems. In fact, Waldemar Lindgren, the father of economic geology, wrote about the BlackSheep area in the 1800s, discussing the plethora of silica sinter at surface.

BlackSheep, geologically speaking, is higher in the system and between the first round of drilling, historic workings, multiple soil geochem and IP anomalies, we are confident we are on to something there. It is rare you hit on the first 4 exploration drill holes in an area. Stay tuned…more to come.

Blacksheep 2021 – 2024 Timeline

So, Q4 will be extremely important for the company as you will be publishing both an updated resource estimate as well as a pre-feasibility study?

That’s right, Q4 will be a big quarter for the Company. I believe the PFS will be a major re-rating opportunity for the Company. The general processing options will remain the same (heap leach and mill); however, the Company is focusing on increasing the annual production profile from 124k oz AuEq/yr in the PEA to something that looks more like 150k to 190k AuEq/yr in the PFS. The majority of this additional mineralization will come from a portion of the unoxidized material at DeLamar. As you may recall, in the PEA we excluded the unoxidized material from DeLamar because we wanted to do more met work on it to increase our confidence in recoveries and processing. Over the last 2 years, we have made a lot of progress and now know a portion of that unox material can be incorporated into the PFS.

Q4 will be an exciting time for us as a Company because on the back of the PFS we will launch into permitting and advancing the project towards a potential construction decision.

In a recent exploration update from the Florida Mountain area, you seem to be pretty successful in actually chasing and expanding the narrower but higher grade gold and silver veins. In fact, some of the widths you announced in your August 31st update were quite good with for instance your headline result of 9.4 meters containing 12.5 g/t gold and 157 g/t silver for a gold-equivalent grade of almost half an ounce per tonne. Looking at the cross section in your press release, you seem to be getting a much better understanding of those higher grade zones. Is that a correct interpretation and may we expect the efficiency of the Florida Mountain drill program to remain high – of course fully acknowledging this is still exploration and there are a lot of unknown variables?

You absolutely nailed it. With almost 100 hits of 4 g/t AuEq, the geological model and interpretation of these veins and structures keeps getting stronger. Our success rate in hitting these high-grade structures is 70% and growing, meaning that the predictability and success of drilling continues to grow each day. This target is big as well, we have hit high-grade structures over a 1,300 m north-south strike length and up-to 400 vertical.

In last week’s drill update we also noticed your drill bit encountered some good grade to high grade results starting close to surface. Hole 122 and hole 125 for instance with respectively 18 meters at 3.9 g/t AuEq and 31 meters containing 4.47 g/t AuEq at a down hole depth of just 2 meters and 12 meters respectively. Can you comment on how important or ‘expected’ it was to find these high grade intervals this close to surface?

This wasn’t unexpected. The geological team has modeled these high-grade shoots through the volcanics and into the vein systems in the granite. Part of the success we’ve had drilling deep is because of our understanding of these near surface shoots. You can actually see evidence of these high-grade shoots in the Florida Mountain open pit, it is quite incredible actually.

Having pockets of higher-grade material in the “open-pittable” resource should benefit the Company as it potentially brings Florida Mountain online.

You will continue to focus on 3 of the 7 known high grade vein structures, how much more work is required to actually add ounces from these zones to a resource model to ‘boost’ your total resources and to underpin the addition of sulphide resources into your mine plan?

By focusing on 3 main structures, we can better focus our exploration program on potential resource growth at depth. As we’ve mentioned in the last few news releases, the Company is exploring the concept of underground exploration which would allow for more efficient drilling and spacings. Obviously, there is more we need to consider on this front; however, it warranted and advantageous we may purse that option in the future. More to come on that but it goes back to the advantage of optionality on a project, of which DeLamar and Florida Mountain have plenty.

About Integra

As a company, you have always had ESG quite on top of your mind even before the term ESG became mainstream. We remember how well you dealt with the locals in Val D’Or when Integra Gold was working on its Lamaque gold project, and you seem to be applying a similar strategy in Idaho to ensure all stakeholders are on board. Could you elaborate on your ESG initiatives?

You’re absolutely right! Being a good corporate citizen is in our DNA. We certainly like to think we approach exploration/development and the communities in which we work in a different way. Engaging diverse voices, groups, associations, NGOs, etc. is, in our opinion, the best way to advance a project. People may not always agree, but if you don’t provide a platform to hear all views, it will be hard to move forward.

The Company recently hired a community relations manager in Idaho and between her and our ESG program, we’ve been trying to make sure we are visible in the community and always available for questions, information, etc. Some of the recent initiatives we’ve worked on include:

Providing a microloan to the newest (and now only) restaurant in Jordan Valley. We will actually be hosting a community BBQ there in August.

– Created an annual scholarship for graduating high school seniors.

– Had a float and sponsored the annual Big Loop Rodeo.

– At the Murphy Outpost days we had gold panning and lots of information on what we are doing.

In a recent update on your ESG initiatives, you announced you signed an agreement with Trout Unlimited. What does that organization do, and how are they able to help?

The goal of Integra is to be part of the new breed of developers, a group that looks to do things differently and creatively. One of the ways we’re committed to being good stewards of the land is through partnerships with organizations committed to the environment, etc. As you mentioned, we recently signed an MOU with Trout Unlimited. This is a unique relationship and one focused on evaluating and rehabilitating areas like the Jordan Creek watershed which were impacted by historic mining. Warren Colyer, the Western Water & Habitat Program Director with Trout Unlimited, commented, “Collaborative efforts with mining companies like Integra can represent tremendous opportunities to improve fish habitat, particularly in areas like the Jordan Creek watershed where it is difficult to secure funding to reclaim environmental damage from long-ago mining operations. In southeastern Idaho, the results of similar partnerships have really begun to show their merit, such as in the Upper Blackfoot River where landowners, companies, agencies and conservation groups have banded together to improve fish habitat, and trout populations are beginning to show improvement.”

The Company has also engaged Warm Springs Consulting to work alongside the Company on trade-off studies to increase margins while potentially decreasing our environmental footprint. That includes electrification studies to reduce fuel costs, etc. Warm Springs and Integra are looking to push the bounds of what a responsible modern mine plan can look like.

As of the end of June, Integra had a working capital position of about C$12.4M, including C$19.6M in cash. What are your budgets for the remainder of this year and what’s the anticipated budget for next year (i.e., how long will your current cash position last?)

The current treasury will take us into Q4. We’ve been drilling a lot and completing heavy engineering work and baselines studies in order to file our Plan of Operations next year and begin permitting the project. We haven’t started budgeting 2022 quite yet, but a lot of our needs will depend on how much exploration we want to complete. Given the success we’ve had with the drill bit, we definitely want to keep the drills turning.

You still have an active ATM in place, but have barely used it: you issued just 41,000 shares in the first quarter at almost US$4/share. It’s understandable you don’t want to use this tool when the share price is too low. Is it fair to assume you will mainly use the ATM program when your share price is trading relatively high? Or are you planning on using it more often going forward?

The ATM is just another tool we wanted in our toolkit. We’ve used it sparingly and will always view it as a means for opportunistic, quick financing.

How is your shareholder registry evolving? Do you see a switch from Canadian to US investors with your full US listing?

Easy answer, yes, we’ve seen an uptick on US investors. After the NYSE listing, we went on a pretty lengthy virtual US marketing trip from Hartford to Seattle and back. It has paid off and we are seeing about 40% of our volume now occurring in the US.

We’ve seen a lot of interest in the space over the last 2 years due to the gold and silver price. After working through a tough market with Integra Gold, what is your takeaway on this renewed interest? Are you getting more pushback, feedback, etc.?

This is an interesting question. There has been a lot of more money flowing into the space and bunch of new companies and project. This industry isn’t for the weak stomachs. We work hard, travel a lot, and constantly hear how we can do things better. It is always fun catching up with someone who went from the banking side to the issuer side. They always think it would be an easy move until you realize you get very little credit for anything you do. Honestly, the system is broken. There are too many companies chasing too few projects that actually work. The industry has too many followers, management teams, etc. looking to make a quick buck rather than actually investing in mine development.

We are often asked, and in some cases criticized, for performance in comparison to a Company paying for a major promotional campaign. It drives you a bit crazy because we are building something real.We are taking the steps via ESG, PFS, permitting to actually build a mine; however,  we, and quite frankly developers as a whole, don’t get a lot of credit for building an asset.  It is pretty frustrating, but all you can do is keep your head down and take the right steps to get an asset towards a construction decision.

DeLamar Deposit

Conclusion

While most companies consider themselves takeover targets, there’s really just a handful of legit targets out there that could pique the interest of mid-tier and senior producers, and Integra Resources clearly is one of them. By having a multi-million ounce gold (and silver) resource in a safe jurisdiction Integra really puts itself apart from so many other junior exploration companies.

While the share price isn’t always cooperating and there sometimes is a massive valuation discrepancy compared to some companies that aren’t as advanced. New Found Gold would be a good example where the current valuation of $1.4B seems to be a little bit ahead of itself compared to Integra’s DeLamar project with 4.4 million ounces (3.9 million ounces measured and indicated and about 0.5 million ounces in the inferred resource category) and an upcoming pre-feasibility study. But the only thing Integra Resources can do is to continue its methodological approach and tick the boxes towards a development decision. Potential suitors usually like a project to be as de-risked as possible, and that’s exactly what Integra Resources is doing.

And keep in mind, Integra Gold only came into play when it was threatening to go into production by itself. And that will likely be the scenario that will unfold at DeLamar as well. Integra Resources will have to continue to advance the project and its economic studies will ‘have’ to show Integra will be able to build the mine on its own.

The upcoming resource update and the pre-feasibility study will be two very important elements in the chain to create value and we expect to see a substantial improvement compared to the results of the 2019 PEA.

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Disclosure: The author has a long position in Integra Resources. Integra Resources is a sponsor of the website.

Precious Metals

Your cash will lose at least 5% of its purchasing power in the next year

Earlier this week, Fed Chair Jerome Powell announced that the real yield on dollar cash and cash equivalents is likely to be -5% or less over the next…

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Earlier this week, Fed Chair Jerome Powell announced that the real yield on dollar cash and cash equivalents is likely to be -5% or less over the next 12 months. Yes, your cash balances will lose at least 5% of their purchasing power over the next year, and that's virtually guaranteed. So what are you—and others—going to do about it?

Assumptions: This forecast of mine optimistically assumes that 1) the first Fed rate hike of 25 bps comes, as the market now expects, about a year from now, and 2) the rate of inflation slows over the next 12 months to 5% from its year-to-date rate of 5.9%. Personally, I think inflation next year likely will be higher, if only because of the delayed effect of soaring home prices on Owner's Equivalent Rent (about one-third of the CPI), the recent end of the eviction moratorium on rents, and the continued, unprecedented expansion of the M2 money supply.

I'm a supply-sider, and that means I believe in the power of incentives. Tax something less and you will get more of it. Tax something more and you will get less of it. Erode the value of the dollar at a 5% annual rate and people will almost certainly want to hold fewer dollars than they do today.

I'm also a monetarist, and that means I believe that if the supply of dollars (e.g., M2) increases by more than the demand for dollars, higher inflation will be the result. We've already seen this play out over the past year: the M2 money supply has grown by more than 25% (by far an all-time record) and inflation has accelerated from less than 2% to 6-8%. Massive fiscal deficits have played an important role in this, but so has an accommodative Fed. Between the Fed and the banking system, 3 to 4 trillion dollars of extra cash were created over the past 18 months. At first that was necessary to supply the huge demand for cash the followed in the wake of the Covid shutdowns. But now that things are returning to normal, people don't need or want that much cash. Yet the Fed continues to expand its balance sheet, and they won't finish "tapering" their purchases of notes and bonds until the middle of next year. That means that there will be trillions of dollars of cash sitting in retail bank accounts (checking, demand deposits and savings accounts) that people will be trying to unload.

If we're lucky, the inept and feckless Biden administration will be unable to pass its $1.5 trillion infrastructure and $3.5 trillion reconciliation bills in the next several weeks. This will lessen the pressure on the Fed to remain accommodative, but it's not clear at all whether it will encourage the Fed to reverse course before we have a huge inflation problem on our hands. Non-supply-siders (like Powell) view an additional $5 trillion of deficit-financed spending as an unalloyed stimulus for the economy. Supply-siders view it as a virtually guaranteed way to increase government control over the economy and thereby destroy growth incentives and productivity.

Amidst all this potential gloom, there are some very encouraging signs, believe it or not. Chief among them: household net worth has soared to a new high in nominal, real, and per capita terms. Also, believe it or not, the soaring federal debt has not outpaced the rise in the wealth of the private sector. See the following charts for more details:

Chart #1

Chart #1 is a reminder of just how low today's interest rates are relative to inflation. Terribly low! In normal times, a 4-5% inflation rate would call for 5-yr Treasury yields to be at least 4-5%. yet today they are not even 1%. The incentives this creates are pernicious: holding cash and/or Treasuries implies steep losses in terms of purchasing power. That in turn erodes the demand for cash and that fuels more spending and higher inflation.

Chart #2

Chart #2 shows the growth of the non-currency portion of M2 (currency today is about 10% of M2). Currency in circulation—currently about $2.1 trillion—is not an inflation threat, because no one holds currency that they don't want. The rest of M2, just over $18 trillion, is held by the public (not institutions) in banks, in the form of checking, savings, and various types of demand deposits. For many, many years M2 has grown at an annual rate of 6-7%. But beginning in March of last year, M2 growth broke all prior growth records. As the chart suggests, the non-currency portion of M2 is about 25% higher than it would have been had historical trends persisted. That means there is almost $4 trillion of "extra" money in the nation's banks. This extra money has been created by the same banks that are holding it: banks, it should be noted, are the only ones that can create cash money. The Fed can only create bank reserves, which banks must hold to collateralize their deposits. Today banks hold far more reserves than they need, so that means they have a virtually unlimited ability to create more deposits. And they have been very busy doing this over the past 18 months. 

For most of the past year I have been predicting that this huge expansion of the money supply would result in rising inflation, and so far that looks exactly like what has happened. People don't need to hold so much of their wealth in the form of cash, so they are trying to spend it. But if the Fed and the banks don't take steps to reduce the amount of cash, then the public's attempts to get rid of unwanted cash can only result in higher prices, and perhaps some extra spending-related growth. It's a classic case of too much money chasing too few goods and services. And Fed Chair Powell has just added some incentives for people to try to reduce their cash balances. He's fanning the flames of inflation at a time when there is plenty of dry fuel lying around.

Chart #3

Now for some good news. Chart #3 shows the evolution of household balance sheets in the form of four major categories. The one thing that is not soaring is debt, which has increased by a mere 20% since just prior to the 2008-09 Great Recession. 

Chart #4

With private sector debt having grown far less than total assets, households' leverage has declined by 45% from its all-time peak in mid-2008. The public hasn't had such a healthy balance sheet since the early 1970s (which was about the time that inflation started accelerating). Hmmm....

Chart #5

In inflation-adjusted terms, household net worth is at another all-time high: $142 trillion. 

Chart #6

On a per capita and inflation-adjusted basis, the story is the same (see Chart #6). We've never been richer as a society.

Chart #7

Total federal debt owed to the public is now about $22 trillion, or about the same as annual GDP. It hasn't been that high since WWII. So it's amazing that, as Chart #8 shows, federal debt has not exploded relative to the net worth of the private sector. As I've shown in previous posts, the burden of all that debt is historically quite low, thanks to extraordinarily low interest rates. 

Chart #8

Chart #8 adds some color to my prior post, "What's wrong with gold?" What it suggests is that gold prices are weak today because the market is anticipating higher short-term interest rates. The red line shows the yield on 3-yr forward Eurodollar futures contracts (inverted), which is a good proxy for where the market thinks the federal funds rate will be in three years' time. Gold peaked when forward interest rate expectations were at an all-time low. Why? Because super-low interest rates pose the risk of higher inflation. With the Fed now talking about raising rates (albeit sometime next year, and very slowly thereafter), gold doesn't make as much sense because forward-looking investors are judging the risk of future inflation to be somewhat less than it was a few years ago.

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Commodities and Cryptos: Oil’s path higher, Gold turns positive, China’s Bitcoin blow

Oil Crude prices continue to climb higher as both short-term supply and demand fundamentals suggest the oil market will remain tight throughout the winter. …

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Oil

Crude prices continue to climb higher as both short-term supply and demand fundamentals suggest the oil market will remain tight throughout the winter.  The crude demand outlook is turning very upbeat as some scientist’s models predict a steady decline in COVID cases through March.  Holiday bookings will continue to pick up, supporting jet fuel demand and a trucking demand crisis will likely mean diesel demand will remain very strong.

A cherry on top for the bullish outlook is that low natural gas inventories and a cold winter for the northern hemisphere could mean added demand for crude as an alternative energy source.  Today’s rally in crude prices is impressive as it has been a steady climb higher this week, alongside a strengthening dollar that normally dampens appeal for commodities.   Oil prices have one direction to go for the remainder of the year and that is higher.

Before the New York open, WTI crude softened after Iranian Foreign Minister Hossein Amirabdollahian said Iran nuclear deal talks will resume soon.  Expectations for sanction relief for Iran have diminished since Iran’s inauguration day.  Negotiations will be a long drawn-out process that will likely require compliance before the US gives any sanction relief.  Extra Iranian barrels of crude seem unlikely to be a 2021 story.

Gold

Gold prices turned positive after Evergrande’s woes extended beyond China.  US Evergrande investors reportedly have not yet received interest payments and the China Evergrande New Energy Vehicle Group Ltd has a serious shortage of funds.  It looks like China won’t save Evergrande but will try to contain any systemic risks, which should lead to some safe-haven flows for bullion.

Gold has been battling against a stronger dollar that stemmed from surging Treasury yields post-Fed.  Gold is in a very tough spot and volatility will remain elevated with the risks remaining to the downside.  The US growth story will continue to improve if COVID modelers are right about a steady decline in COVID cases through March.  If Evergrande’s fallout is contained over the weekend, gold could be vulnerable for a test of the $1700 level.

Bitcoin

Bitcoin was dealt a major blow after China’s central bank said all cryptocurrency transactions are illegal and must be banned.  Bitcoin initially fell over 5% and the other top coins dropped around 10%.   Overseas exchanges that offer Chinese residents services are illegal, also taking aim at Chinese nationals who work at those exchanges are at risk of an investigation.  Bitcoin, Ethereum, and Tether were specifically named as cryptos that can’t circulate in China.

Beijing withheld banning possession of cryptocurrencies, which would have dealt a massive blow to the entire crypto space.  A banning of possession of cryptos probably would have sent everything crypto 20% lower.  If you are a Chinese crypto holder, you might be deciding now is the time to cash out.  Three years ago, crypto was heavily centralized in China, with over two-thirds of the mining happening there.  If Chinese crypto holders fear a ‘possession ban’ is looming, a tremendous amount of selling from old wallets may occur.

Bitcoin remains extremely vulnerable on the break of the $38,000 level, which could trigger momentum selling to the $35,000 level.

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7 Materials Stocks to Buy as Investors Look Forward to 2022

While materials stocks occupy the undesirable quality of competing for the title of most boring investment category, Wall Street might very well apply…

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While materials stocks occupy the undesirable quality of competing for the title of most boring investment category, Wall Street might very well apply a premium for dull holdings. For instance, while the S&P 500 index has been a solid performer — up 18% on a year-to-date (YTD) basis — over the trailing month, it’s down just under 1%.

Concerns about domestic economic stability, along with rumblings overseas has investors spooked. Not surprisingly, many folks are deciding enough is enough, taking their money out of risky ventures. While the U.S. market isn’t exactly a sterling opportunity, the reality is that over the long term — as legendary investor Warren Buffett implied — America represents a solid place to grow your wealth. And that sets up an intriguing scenario for materials stocks.

As you know, one of the reasons for President Joe Biden’s election victory last year was his promise to “build back better.” What that slogan translated to was a multi-trillion-dollar infrastructure bill, an initiative that if passed would augur well for materials stocks. Of course, fiscally conservative Republicans and moderate Democrats aren’t exactly thrilled at the scope of the proposal. Per the Washington Post, Biden is attempting to broker a truce within his own party ranks.

Given the acrimony — and sometimes sheer chaos — of the Washington machinery, it’s not entirely clear what will come of the infrastructure bill. But in terms of the viability of materials stocks, prospective investors might not need to worry so much about domestic politics. As it turns out, the situation in China — particularly the liquidity crisis of major property developer China Evergrande (OTCMKTS:EGRNF) — is much worse.

Therefore, a combination of faith in the American political process and cynicism that not many stable opportunities exist abroad casts a favorable light on boring but reliable companies dedicated to rebuilding from the novel coronavirus disaster.

Volatility-weary investors may want to consider these materials stocks:

  • International Paper (NYSE:IP)
  • Celanese (NYSE:CE)
  • LyondellBasell (NYSE:LYB)
  • DuPont (NYSE:DD)
  • Nucor (NYSE:NUE)
  • Southern Copper (NYSE:SCCO)
  • Olin Corporation (NYSE:OLN)

Just to be clear, boring investments don’t necessarily equate to insulation from red ink. As U.S. Treasury Secretary Janet Yellen reminded us in an op-ed for the Wall Street Journal, we’re not exactly out of the woods either — far from it. Thus, it’s best to approach these materials stocks with the same due diligence as you would any other business sector.

Materials Stocks to Buy: International Paper (IP)

Source: Mark ONCE / Shutterstock.com

At first, you might be forgiven for rolling your eyes at International Paper. While materials stocks never registered highly on the excitement scale, International Paper also appears to be irrelevant. With so much emphasis placed on going green — and therefore digital — there doesn’t seem to be much room for IP to grow. The Covid-19 crisis has also placed importance on contactless transactions.

Nevertheless, growing is exactly what it’s doing right now. Certainly, 2020 was a rough year for International Paper, with its revenue down 8% from 2019’s tally. However, in the trailing-12-month period, the company is on course to generate $21.3 billion, up nearly 4% from 2020’s result. That’s not bad for a seemingly anachronistic investment.

In reality, materials stocks form the physical backbone of our economy, and International Paper is no different. True, we may be attempting to reduce our dependency on paper, but thanks to the mercurial rise of e-commerce during the lockdowns, packaging demands have accelerated. Additionally, IP is directly linked to seemingly mundane but vital goods like baby diapers and personal hygiene products.

Celanese (CE)

A photograph of various medical tubes attached to equipment in a hospital.Source: sfam_photo / Shutterstock.com

One of the peculiar dynamics of materials stocks is that while the segment as an investing opportunity doesn’t always bring the pizzazz, the underlying products and services are vital to everyday living. Take Celanese as an example. A global chemical and specialty materials firm, it’s not exactly a household name. However, it’s no hyperbole to suggest that Celanese represents the difference between life and death for its innovations’ ultimate end-users.

Among the many solutions the materials company provides, it has a robust healthcare and life sciences business. From drug delivery methods and devices to surgical and medical consumable solutions (i.e., tubing, respiratory equipment, dental products), it’s very likely that we’ve all come in contact with the Celanese brand.

If that wasn’t enough to pique your interest, the company also represents a vital cog in the 5G rollout — that’s right, it’s not just telecom shares that you should consider but also materials stocks! In this case, Celanese lends its hand through expertise in liquid crystal polymer solutions and other high-performance thermoplastics.

Materials Stocks to Buy: LyondellBasell (LYB)

A LyondellBasell production plant in Wesseling, Germany is seen at dusk.Source: Flagmania / Shutterstock.com

For those who are looking for value in their materials stocks, you might want to check out LyondellBasell. Based in the Netherlands, LyondellBasell is one of the world’s largest plastics, chemicals and refining companies. From high-level industrial applications to the most mundane activities, LYB features “background” relevance across the board.

For instance, a major component of LyondellBasell’s everyday solutions is in food packaging. According to Grand View Research, the global ready-made meals market reached a valuation of $159.15 billion in 2019, with experts predicting that it will expand at a compound annual growth rate of 5.5% from 2020 to 2027. That translates to global revenue of $244.3 billion by the end of the forecasted period.

Why is this important for LYB stock? The underlying company recognizes that consumers are looking for “the quick and easy solution” in their packaged food products, an attribute that LyondellBasell specializes in.

Best of all, LyondellBasell is the world’s largest licensor of polyolefin technologies, which have myriad applications in industries ranging from medical, filtration and transportation sectors, among others. Should the U.S. and other nations spark a build out, LYB could benefit handsomely.

DuPont (DD)

The logo for DuPont (DD).Source: ricochet64 / Shutterstock.com

One of the world’s premiere materials stocks, DuPont is synonymous with everyday products and innovations that we take for granted. From home goods to military applications, if you want maximum coverage in this sector with one name, DD stock would be it.

What’s particularly appealing about DuPont at this juncture is that it could be one of the most viable value plays among materials stocks. Similar to LYB and CE above, DuPont shares have printed some red ink recently. Over the trailing month, DD found itself staring at a 7% loss. And on a YTD basis, it’s down over 3%.

However, that could be due for a change because of our rapidly changing world. For instance, DuPont produces Nomex, a heat-and-flame resistant material that’s vital for protecting firefighters. As you know, climate change has contributed to record-breaking wildfires, which cynically drives demand for Nomex products.

As well, DuPont is famous for manufacturing Kevlar, which in addition to being vital for infrastructure is best known for undergirding military body armor. With our national security profile increasingly shaky, DD stock offers multi-tiered relevance.

Materials Stocks to Buy: Nucor (NUE)

Steel stocks: rods, bars and other forms of steelSource: Shutterstock

If you believe that President Biden can resolve conflicts brewing between high-profile Democrats and succeed in pushing through the infrastructure bill, Nucor will be one of the top materials stocks to consider. Billed as the “safest, highest quality, lowest cost, most productive and most profitable steel and steel products company in the world,” Nucor has a track record that few can assail.

At the same time, it’s appropriate to consider the risks, which are rather sizable. Obviously, if Washington acrimony succeeds in scuttling the infrastructure bill, NUE stock will look far less attractive than it does now. In addition, the underlying company is exposed to global growth dynamics; hence NUE’s sharp loss on Sept. 20 following China Evergrande’s default worries.

As a result of the nearer-term threats, NUE has been discounted sharply in recent days. Over the trailing month, it’s down 15%. However, if the government approves some level of infrastructure spending, NUE could benefit.

Also, Nucor provides steel solutions for the automotive industry, which has been a disaster due to the semiconductor supply crisis. Nevertheless, once that problem fades away, Nucor could swing higher on a demand ramp up.

Southern Copper (SCCO)

Piece of copper set against black backgroundSource: Coldmoon Photoproject/Shutterstock.com

Back in May of this year, some commodity analysts suggested that investors take a contrarian view on the copper mining space, arguing that it was undervalued compared to the target commodity. Further, they anticipated higher prices in the fourth quarter of 2021, suggesting that key copper fundamentals — including dollar weakness and a post-Covid-19 recovery trek — should bode well for the industrial metal.

Despite some key changes to the global economic forecast since then till now, many factors remain positive for copper. By logical deduction, Southern Copper could be one of the top materials stocks to buy once we work out of the present funk.

Moving forward, should the Biden administration succeed in its infrastructural buildout initiatives, Southern Copper stands poised to deliver big contrarian gains as the underlying commodity is critical to electric vehicle production. If the White House is serious about getting the U.S. economy to hit net-zero emissions by 2050, EVs will play a critical role.

Further, copper being a highly efficient conductor of electricity is also crucial for renewable energy systems. Thus, SCCO is one of the must-watch names among materials stocks.

Materials Stocks to Buy: Olin Corporation (OLN)

Olin Corp (OLN) logo displayed on a mobile phone screen representing dividend stocksSource: IgorGolovniov / Shutterstock.com

As one of the global leaders in chemical production — particularly chlor alkali products and epoxy — Olin Corporation enjoys relevant demand sources from myriad industries. As such, OLN will be among the materials stocks to gain an advantage from the infrastructure bill should it pass.

However, I can understand that some people might not be interested in buying shares that have anything to do with Biden’s policies. Following the Afghanistan debacle, the president doesn’t exactly have the confidence of the nation. But if you do happen to have hard feelings about the current administration, then OLN stock could be a cathartic wager.

In addition to chemical products, Olin owns the Winchester brand of ammunition. Due to the record-breaking surge in firearms sales, ammo prices have likewise shot through the roof due to dwindling supplies. Moreover, the ridiculous prices continue to be a challenge for the outdoorsman types.

Some reports indicate that the ammo shortage could last between 12 to 24 months. Moreover, threats of gun control policies could spike up demand for firearms and related products. Thus, the Biden administration is a perfect catalyst for OLN stock.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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