President Donald Trump’s much-anticipated infrastructure plan grabbed headlines again this month, as details of his spending proposals finally started to emerge. Now all Trump has to do is: Get his $1 trillion spending spree on roads, bridges and railways through a partisan Congress. Good luck with that.
Meanwhile, the REAL infrastructure story that is about to boost commodity prices — especially the metals — in a big way is happening right now halfway around the world … in China. Here’s an important update about what’s going on, which metals stand to benefit the most, and most importantly: Three new trade recommendations rich with profit potential to take full advantage of it.
China’s New Silk Road …
My friend and colleague Larry Edelson wrote extensively about China’s NEW Silk Road 2.0. It’s an ambitious plan to rebuild ancient trade routes connecting the Middle Kingdom to Europe both by land and sea. Of course, this project — officially dubbed China’s Belt and Road Initiative — involves massive infrastructure spending, the likes of which President Trump can only dream.
Already, projects worth about $1.3 trillion are under way in the region. The projects, which span 62 Belt-Road countries, will speed up trade links between the East and West. Over the next five years: “From Bangladesh to Belarus, railways, refineries, bridges, industrial parks and much else is being built,” according to a Bloomberg report.
Just one of many multibillion-dollar projects links China to London with a 7,500-mile railway through nine countries. When it’s finished, freight trains will cross the Eurasian continent in just 18 days!
Today about one-fifth of total global trade passes through the New Silk Road’s trade routes. And since China is the world’s largest exporting nation, this project is a major initiative for Beijing — and truly is a win-win project for all of Asia.
As Larry astutely wrote over two years ago, China’s New Silk Road is “transforming the lives of over 630 million Chinese. Turbocharging the Chinese economy and tying it to Middle Asia and onward to Europe …
“Replacing the old, shuttered Silk Road which began during the Han Dynasty, between 206 B.C. — 220 A.D. And there will be a new Maritime Silk Road as well, from the middle of China to Thailand, Singapore, Indonesia, and Malaysia.
“All told, it is the largest infrastructure project in the history of civilization, both in terms of the amount of money that will be invested and the people it will positively impact. Not to mention the profits it could spin off for investors like you and me!”
Well under way, Beijing’s grand plan will modernize all of rural western China. This urbanization of such a vast area will raise incomes and improve the quality of life for 630 million people, which represents 10% of the entire global population. So, you can see it’s a massive undertaking that is transforming the entire global economy — not just China’s.
As a result of the New Silk Road, investment opportunities are opening up in everything from transportation and industrial manufacturing to healthcare and telecommunications. Plus, it will provide a massive boost to consumption spending in China.
In fact, rural per-capita income in China is growing at a rate of 12.4% since 2013. That’s much faster than income growth in urbanized eastern China, which is still a healthy 9.7%.
Many companies in China are well-positioned to cash in on the New Silk Road. But some of the biggest winners will likely be leading producers of the basic materials needed for the actual infrastructure projects.
I’m thinking about all the bridges, tunnels, roads, railways and ports that are being built all across China and Central Asia. That’s not to mention all the new power plants needed along the way to connect rural western China to the grid.
This brings me to my three new recommendations that are perfectly positioned to profit — indirectly — from China’s New Silk Road.
The biggest winners: Heavy metals
So, which natural resources will be the biggest winners as a result of the New Silk Road buildout?
My answer: Three metals stocks look perfectly positioned to profit.
This list includes a precious metals stock that looks even more attractive than gold and silver right now, plus two not-so-precious, industrial metal stocks.
First, let’s take a closer look at the industrial metals: Copper, iron ore, steel, zinc, etc … the non-precious metals that go through regular boom-and-bust cycles.
Well, they’re about to boom again like never before.
The base metals are just now coming off the latest bust cycle. This means these stocks are available at bargain prices right now.
Copper prices, for example, are still down over 60% since their pre- financial-crisis peak in 2008. Then, after doubling in value from 2010 to 2012, copper has tumbled another 50%-plus since mid-2012. Zinc, iron, lead, nickel and steel prices are all likewise at or very near one-year lows.
But all that’s about to change.
You see, the bust in base metal prices in recent years took plenty of production capacity offline. Many companies went bankrupt. Those that survived slashed production by closing older, less-efficient mines and mills.
For instance, mining giant Glencore cut its copper production by 400,000 tons just over a year ago. Miners have also cut exploration-and-production budgets to the bone.
Now the time is fast approaching when low commodity prices and less supply start to have an upward impact on industrial metals’ prices again.
It helps that China has an insatiable appetite for metals and natural resources of every kind. In fact, the Middle Kingdom now consumes 48% of the world’s copper, 46% of all steel, 54% of aluminum and a staggering 60% of the world’s concrete.
Here’s a fun cocktail-party fact: China consumed more concrete in the three years ended 2015, than the U.S. did in the entire 20th century!
Recently, the world’s largest metals miner, BHP Billiton Ltd. (BHP), said that building the New Silk Road’s infrastructure will add 150 million tons to global steel demand.
That means much higher prices, plain and simple. And it’s not just steel.
Prices of copper, coal, iron, even uranium, have all been on a roller-coaster ride — with plenty of stomach-churning downdrafts — over the past few years. But these not-so-precious metals are about to surge sharply higher for two reasons:
#1: China’s ongoing appetite for metals and materials to build the New Silk Road, and …
#2: Falling global supplies of base metals thanks to years of volatile prices leading to falling production.
A big reason for volatility in metals prices was a temporary slowing in China’s rapid growth. Since 2015, China has devalued its currency and tightened its domestic money supply, in large part to rebalance its economic-growth trajectory, to cool an overheating real-estate market, and also to discourage too much debt accumulation.
As a result, China’s economy slowed. But, it has now stabilized, and it’s showing recent signs of picking up again. Consumption has fueled faster growth — retail sales grew 10.9% last month alone, supported by solid disposable-income growth — exactly as Beijing intended.
This means China can also step up its fixed-asset investment spending again. Especially its biggest infrastructure investment of all time: The New Silk Road.
Copper prices, just like all the other industrial metals, have been on a wild ride in recent years, both up and down. Every time copper prices soar, it’s because of China’s insatiable appetite — gobbling up nearly half of the global copper supply. And every time copper prices crash, it’s due to fears of slowing growth in China.
Now, with China’s economy growing again, it’s just a matter of time before copper prices surge higher again.
This leads me to my first recommendation for Real Wealth Report members this month: Freeport-McMoRan Inc. (FCX), the world’s largest copper producer. And sure enough, FCX just reported first-quarter results with realized copper prices up 20% year-over-year thanks to — you guessed it — stronger demand from China!
FCX is uniquely positioned to capitalize on the rise of copper, thanks to China’s New Silk Road. Freeport’s mammoth copper/gold Grasberg mine in Indonesia, the world’s largest, produces extremely high ore grades and has a very long reserve life. That means FCX is an ultra-low-cost producer, which translates into wide profit margins for many years to come.
When copper prices surged higher after the Great Recession in 2009-’10, FCX’s share price soared more than 650% … that’s NOT a typo … six-hundred-and-fifty percent!
In 2016 and early this year, copper prices jumped 30% … and FCX shares soared over 300% in value!
We’re talking MAJOR leveraged upside potential to the price of copper here. I believe we’re about to see a repeat performance for copper, and especially FCX shares!
But it’s not only metals that China consumes like crazy: The country is a prolific energy consumer, too. In fact, China surpassed the United States several years ago as the world’s largest energy user, including crude oil.
China consumes 12% of the world’s oil today. But it also consumes a whopping 49% of global coal supplies both for generating power and for the metallurgical processes to make steel.
China also uses 13% of the world’s uranium. And that’s precisely where I see the biggest potential growth to meet China’s expanding energy demand.
The reasons are simple. Consuming 49% of the world’s coal already, China can’t keep building coal-fired plants with abandon. Plus, China already has serious pollution problems as a result of coal.
So what about oil? Crude oil prices have been notoriously unstable in recent years. And China imports so much of its oil that it’s really at the mercy of outside suppliers. That’s why China is willing to go to war over the South China Sea, because of the estimated 28 billion barrels of oil reserves that lie beneath.
But China has an even easier energy solution right in its own back yard: Uranium, the heavy metal used to power nuclear reactors.
In fact, uranium-rich China boasts an estimated 2 million tons of the silvery, radioactive metal. And the Middle Kingdom has significantly increased its domestic uranium exploration and production as part of its five-year plan for 2016-’20.
Last year, China had 30 operating reactors. But it plans to build more than 100 new units by 2030 — which must be fueled by 24,000 tons of uranium — to ease its dependence on fossil fuels.
That means a huge increase for uranium demand in China, which in 2012 only produced 1,500 tons a year domestically.
That’s why, even as domestic uranium production increases, China is also sourcing supplies globally. In the past decade alone, Chinese companies invested in 15 uranium deposits in six different countries.
And this brings me to my second recommendation for the June Real Wealth Report: Cameco Corp. (CCJ). This high-quality miner specializes in uranium, and it offers you a great second-chance to invest in China’s growth story for three key reasons.
First, CCJ owns several of the world’s highest-grade uranium deposits. In fact, the company’s mine in Saskatchewan boasts ore-grade concentrations 100 times higher than the industry average.
Plus, Cameco is one of the lowest-cost uranium producers in the industry, which means (just like FCX), juicy profit margins!
Second, when you talk about low commodity prices being the “cure” for low commodity prices, uranium takes the cake. Uranium prices have fallen each year since the Fukushima disaster in 2011. The mined supply of uranium has plunged as a result. It can barely keep up with current demand, let alone growing demand from China and other emerging-market nations.
In fact, analysts estimate a global supply deficit in uranium to emerge by 2021, BUT this shortfall will begin pushing prices higher much sooner. That’s because nuclear utilities tend to lock in longer-term supply agreements three-to-four years in advance. So prices should begin rising dramatically this year!
Third, the demand picture for uranium looks even more bullish than the supply side of the equation. China expects to more than triple its nuclear-reactor capacity by 2025, sending global uranium prices soaring by 40% or more over that period, according to estimates.
And while China plays a huge role in the uranium-demand story, it isn’t the only player. New reactors in India, South Korea and Russia as well as reactor restarts in Japan will drive the strongest uranium-demand growth in decades!
Uranium prices could easily top $65-per-pound by 2021, perhaps sooner than that. That’s more than double from $30-a-pound at the end of 2016.
And CCJ is the best-positioned company on the planet to cash in. In 2009-’10, CCJ shares soared 250% as uranium prices recovered after the global financial crisis.
And late last year, its shares jumped nearly 80% just on the hint of a rebound in uranium prices. Since then, CCJ shares have pulled back again under $10. But I believe this stock could easily double again in the next year!
So that’s the story behind my two non-precious-metals picks for Real Wealth Report this month. But just like Larry, I’m first and foremost a fan of precious-metals stocks.
So my third recommendation is a stock that mines a precious metal that is even a BETTER buy than gold today: Platinum!
Historically, platinum has almost always been given a higher value than gold — sometimes MUCH higher. But the reverse is true today. While gold challenged the $1,300-an-ounce level again recently, platinum got mired near a one-year low, around $940-an-ounce.
That’s a highly unusual situation. It tells me that platinum may be the most-undervalued precious metal right now, with more upside potential ahead.
In the next chart, you can see how rare it is for platinum to trade at a discount to gold. In fact, for most of the last precious-metals bull market, from 2000 to 2011, platinum consistently traded at a premium to gold. During most of that time, including every year from 2002 to 2008, platinum was priced at 1.5- to more than 2-times the price of gold!
But in the last few years, platinum has traded at a discount to the yellow metal, recently hitting its lowest level EVER compared to gold.
History tells us that anytime in the past, when platinum traded at a discount, it didn’t last very long. In fact, platinum prices typically soared higher as a result.
As you can see, in 1996 platinum traded at a slight discount to gold for a short period. Within two years, platinum prices surged to a 35% premium over the yellow metal.
Again in 2012, platinum reached a 12% discount to the price of gold. But by mid-2014, platinum was trading at a 16% premium to gold.
This year, platinum prices hit a new all-time low compared with gold, at a never-before-seen 25% discount to the yellow metal.
The historical analysis tells me either gold prices will fall or platinum is ridiculously undervalued right now in comparison. What’s more, our E-Wave cycle forecasts tell us gold has bottomed and is headed higher in the months ahead.
So I’m even more willing to bet on a much bigger rally in platinum. Here’s how …
Sibanye Gold Ltd. (SBGL) is a South African-based precious-metals miner that recently and significantly enhanced its appeal with the acquisition of U.S. based Stillwater Mining.
Stillwater owns the highest-grade platinum group metals (PGM) mines in the world. Plus, it’s THE lowest-cost producer in the world on an all-in sustaining-cost basis, producing about 550,000 ounces of platinum and palladium last year.
Stillwater also operates the biggest PGM recycling business in the world today, reclaiming about 668,000 ounces of PGMs last year.
This smart and timely acquisition — while platinum prices are so depressed — transforms SBGL into a unique, global precious-metals company.
Sibanye now ranks as the third-largest global producer of both platinum and palladium, and it’s the ONLY primary producer of palladium. Plus, SBGL ranks among the top 10 global gold miners, a uniquely attractive precious metals mix.
To help fund the acquisition of Stillwater, SBGL announced a $750 million rights offering to current shareholders, which of course dilutes the value of existing shares. But in my view, the acquisition of Stillwater’s high-quality and low-cost mining operations more than offsets this dilution. That is, if you’re willing to take the longer-term view.
As a result of the rights offering, SBGL shares sank more than 30% over the past month. This is an incredible bargain price for such an attractive precious-metals stock.
With the rights offering nearly concluded, SBGL shares won’t remain this cheap for very long, and I see the share price easily doubling in value from here.
It’s time to lock-and-load. So let’s get straight to what action you should take right away in your Real Wealth portfolio!
Basic Survival Strategies
First, let’s go over my new recommendations in detail:
NEW RECOMMENDATION: #1: Using 5% of your Basic Survival Strategies funds, buy Freeport-McMoRan Inc., symbol FCX, at the market. When filled, place a good-till-canceled sell-stop at $9.20.
NEW RECOMMENDATION: #2: Using 5% of your Basic Survival Strategies funds, buy Cameco Corp., symbol CCJ, at the market. When filled, place a good-till-canceled sell-stop at $7.35.
NEW RECOMMENDATION: #3: Using 5% of your Basic Survival Strategies funds, buy Sibanye Gold Ltd., symbol SBGL, at the market. When filled, place a good-till-canceled sell-stop at $4.05.
Note: If you don’t already own these recommendations, go ahead and act now. But, if you were previously a member of Global Resource Hunter, then you should already have a position in FCX. So, all you need to do is place the appropriate good-till-canceled sell-stop on your shares.
Meanwhile, let me update you on existing positions …
FIRST, continue to hold your physical gold as recommended. If anything changes, or I decide you should hedge your current holdings, rest assured I will notify you immediately in Real Wealth, or via a Flash Alert if necessary.
Continue to hold your …
Core Gold Bullion (GOLDS), up 225.8% since originally recommended.
SPDR Gold Shares (GLD), up 181.4% since our initial recommendation.
Tocqueville Gold Fund (TGLDX), up 21%.
SECOND, hold your Platinum Bullion (XPT) and Palladium Bullion (XPD), which should be very minor in holdings.
THIRD, for spot silver: You should have 5% of your Basic Survival Strategies funds invested in Silver Bullion (XAG) when it hit $16.30 on Nov. 23. Hold. I will let you know when to add-to, or hedge the position if need be.
FOURTH, last month I recommended that you add two new high-quality mining stocks to our holdings in the Basic Survival Strategies portfolio.
Keep holding your shares in IAMGOLD Corp. (IAG) with a good-till-canceled sell-stop at $3.05.
If you’re not on board already, for whatever reason, use 3% of your capital allocated to Basic Survival Strategies, buy IAMGOLD Corp., symbol IAG, at the market. Place a good-till-canceled sell-stop at $3.05.
Keep holding your shares in Wheaton Precious Metals Corp. (WPM) with a good-till-canceled sell-stop at $18.40.
If you don’t own it, for whatever reason, use 3% of your capital allocated to Basic Survival Strategies, buy Wheaton Precious Metals Corp., symbol WPM, at the market. Place a good-till-canceled sell-stop at $18.40.
Also, continue holding …
Your shares in Yamana Gold Inc. (AUY) with a good-till-canceled sell-stop at $2.34.
If you’re not on board already, for whatever reason, use 3% of your capital allocated to Basic Survival Strategies, buy Yamana Gold Inc., symbol AUY, at the market. Place a good-till-canceled sell-stop at $2.34.
Your shares in Goldcorp Inc. (GG) with a good-till-canceled sell-stop at $11.49.
If you don’t own these shares, for whatever reason, use 3% of your capital allocated to Basic Survival Strategies, buy Goldcorp Inc., symbol GG, at the market. Place a good-till-canceled sell-stop at $11.49.
Your shares in Kinross Gold Corp. (KGC) with a good-till-canceled protective sell-stop at $2.25.
If you’re not on board already, for whatever reason, use 3% of your capital allocated to Basic Survival Strategies, buy Kinross Gold Corp., symbol KGC, at the market. Place a good-till-canceled sell-stop at $2.25.
I’ll be looking to add to these positions soon, but for now, be patient. Our time to load up on more miners is coming shortly.
And remember, I’m constantly scanning my watchlist of high-quality miners with low production costs for new potential buy recommendations. Stay tuned, because I expect to add substantially to your mining-stock holdings again later this year.
FIFTH, keep holding your shares in Vantiv Inc. (VNTV) with a good-till-canceled sell-stop at $49.74.
If you’re not on board already, for whatever reason, use 3% of your capital allocated to Basic Survival Strategies, buy Vantiv Inc., symbol VNTV, at the market. Place a good-till-canceled sell-stop at $49.74.
SIXTH, keep holding your shares in Textron Inc. (TXT) with a good-till-canceled sell-stop at $42.68.
If you’re not on board already, for whatever reason, using 3% of your capital allocated to Basic Survival Strategies, buy Textron Inc., symbol TXT, at the market. Place a good-till-canceled sell-stop at $42.68.
Before moving on, I want to welcome aboard former members of Global Resource Hunter and Cash Flow Kings to the Real Wealth Report. As for any existing stock holdings from these services, you may continue to hold if you wish, but we won’t be tracking any of these stocks. (With the exception of names that overlap, like FCX.)
Or you may want to consider selling these stocks to free up some cash to invest in new Real Wealth Report recommendations. As you’ll see on the back page of this issue, there are quite a few open recommendations you can act on right away to get started.
Also, let me introduce you to my Real Wealth Report team, and tell you what to expect going forward.
I’m ably assisted by two key members of the Edelson Institute team: David Dutkewych, our chief trader, and John Isaacson, our chief technical analyst. Dave and John bring many years of experience in the investment business to this publication. And all three of us were very fortunate to have such a great mentor in Larry Edelson, who founded the Real Wealth Report nearly 40 years ago.
Each and every month, my team and I will deliver our very best, actionable analyses and trade recommendations covering global markets. Our primary focus will be squarely on real, tangible assets that have enduring value.
Specific buy and sell recommendations will include natural resources plus high-quality stocks and ETFs that will not only survive, but thrive in turbulent markets. Trade recommendations fall into one of five broad sectors to provide you with maximum diversification and profit potential:
Basic Survival Strategies: Covers gold and silver plus other precious metals and natural resource opportunities, as well as any other investments that you must own to grow and preserve your wealth.
Materials, Energy & Agriculture: In this section, we focus on leading natural resource and commodity investments including: Energy, industrial metals, food and more — the necessary raw materials that are most in demand.
Income Investments: In a world of ultra-low and even sub-zero interest rates, these investments are designed to earn you higher income from stocks and funds paying rock-solid dividends and royalties.
The Speculator: For more aggressive investors looking for speculative and higher-profit-potential trades, this section focuses on specialty investments designed to magnify your potential returns.
Asia Investments: Together with precious metals, Asia accounts for the bulk of my own personal investments. We are in the midst of a great wealth transfer from West to East. So our focus here is to feature our in-depth research into Asia’s fast-growing countries and companies.
David and I collaborate on the Basic Survival Strategies section of this letter, and Dave also writes The Speculator and Asia Investments sections. John covers the Materials, Energy, and Ags section, his investment specialty, plus the Income Investments section.
Every issue of Real Wealth Report will focus on the most important events that are impacting the investment world, and even more importantly, our forecasts for key market trends and actionable trade ideas designed to capitalize on them, all based on the pioneering cycle research Larry Edelson entrusted to us.
