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2022: party like
its 1999 baby

Its the best party you've ever been to, Jerome Powell stands on the table spraying Dom Perignon from both hands over the heaving crowd as the DJ drops another fat sway in the sweaty heaving mass of bodies, sweet champagne misted through the air soaking up the beat, in the distance you hear police sirens, suddenly you remember you heard those sirens what seems like an age ago. What to do? This is the best party you've ever been to but the cops are coming to shut it down..


When we look back at 2022 and consider tightening monetary conditions, inflation at 40 year highs, slowing growth, record indebtedness and an oil price shock will we be surprised if the S+P 500 is not 30% lower than today?


The bear market of 2022 and 2023 for equity and bond markets is any case already underway, on 14th of January 18 US companies made 52 week highs and 63 made 52 week lows. Inflation driven by wages, housing and energy prices is rising quicker than interest rates.


In 2021 we favoured energy particularly coal and remain bullish oil, gas, coal and uranium. We think oil will go to $120/barrel in 2022 with a chance of a much higher spike as we hit maximum pumping capacity with the resumption of normal air travel this year.


Our BIG CALL for 2022 is precious metals, gold and silver, we hear no one calling for significantly higher gold prices and think 2022 will be gold and silvers revenge over risky crypto. Bitcoin will continue its slide and finish 2022 sharply lower. Some fear higher interest rates are negative for gold, this misses the point that inflation is increasing faster than interest rates which means that REAL interest rates are deeply negative and falling fast. Perhaps the first Fed rate hike this cycle expected March 2022 will fire the starting gun for a gold price rally as it did in 2016. Gold should easily push through $2000/ounce and head for $2500/ounce later in 2022.


The median returns of gold in the past four tightening cycles is plotted below, in summary gold falls leading into the initial interest rate rise then outperforms equities and the USD:


A sharp slowdown in China seems a significant risk as its government attempts to lock Covid out and fails. The US economy is less strong than it looks with consumer confidence at its lowest level in a decade as folk worry about inflation. Hence we are selectively bullish on industrial metals while cautious on popular battery metals.


Some companies we own and like for 2022 include:


First Tin (1SN listed on the LSE from March 22) will give investors what they currently don't have in the investable tin universe: CHOICE. Arlington have spent the past year advancing two significant tin assets in Germany and Australia and hired a CEO from the top German copper/tin producer; Aurubis.


Thomas Buenger, former COO of Aurubis and his team will lead the development of the Tellerhauser Mine in Germany and noted industry veteran Tony Truelove will advance the Taronga Mine in Australia. First Tin will boast more tin resources than ANY of its listed developer peers with high grades, first world infrastructure, valuable by products and mining permits for both projects. Marketing of First Tin starts February 14th with listing in the London Stock Exchange expected March 4th, Frankfurt shortly thereafter and the Australian Stock Exchange by June 2022.


Fluor Corporation (FLR on the NYSE): our favourite nuclear/uranium trade as Fluor’s engineering business returns to profitability driven by US energy, new copper mines and data storage facilities hosting. Fluor is guiding to +$3.00 of earnings in 2023 implying ~8X PE next year.


NuScale - Fluor’s Small Modular Reactor (SMR) technology will drive the share price with new contract wins and the only US Dept of Energy approved SMR design moves towards commercialisation. A major catalyst will be the spin out NuScale into a SPAC worth $1.9 billion of which Fluor owns 60% by mid 2022.


Tullow Oil PLC (TLW on LSE): having refinanced without equity dilution in 2021 Tullow will demonstrate significant production growth from its flagship Jubilee/TEN oil field in Ghana and successfully farm down its Kenyan oil development in 2022.


Wiluna (WMC on the ASX) will surprise most market although not industry observers in 2022 and double production from their gold mine to over 100,000 ounces by mid 22.  We think Wiluna management will deliver and are curious as to what Wiluna’s Russian and German shareholders may have in mind for this future top ten Aussie gold mine.


Serious silver bulls should look no further than Discovery Silver (DSV on the TSX).


DSV are the only +10 million ounce per year silver development asset we know which grows to +20 million ounces pa silver equivalent when you add the zinc production from DSV's Cordero Project in Chihuahua State in Mexico. We visited  Cordero in November 21 and see the asset growing in 2022 as Discovery evolves into a developer/operator. There are 5 or 6 interesting regional exploration targets DSV will drill in 22 that should keep the share price bubbling along.


The greatest wealth creation in commodity investment comes from exploration success but its hard to predict so we prefer to get exploration upside for 'free'.


Salazar Resources (SRL on the TSX) are the best LOCAL explorers in one of the worlds top destinations for finding large porphyry copper projects; Ecuador - that's not our view but what the global experts like Greg Corbett and Jamie Wilkinson are saying and the worlds largest mining companies like BHP, Newcrest, Fortescue, Anglo and Teck are DOING.


Salazar are drilling three 100% owned porphyry copper/gold targets in 2022 and also hope to permit and monetise their free carried 25% owned Curipamba asset worth over twice their current market capitalisation. Salazar have in recent days started drilling their 100% owned copper/gold property "Santos" acquired in 2021. The Santos license adjoins Lumina Gold's Cangrejos 10 million ounce gold and 1.4 billion pound copper this space.


Enjoy the party and make sure you leave before the cops arrive!!

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