Despite the global transition to green energy continuing to accelerate, the critical materials and minerals that support the transition have failed to garner interest from traders and investors, causing the commodity sector to suffer a bear cycle for many months.
EarthLabs SPOFF, a Canadian mining investment and technology company, has been positioning itself for a turn in the commodity market and is taking a multi-faceted approach to its investments and business arms.
“EarthLabs is a total Frankenstein, in the most beautiful way,” said Executive Chairman and CEO Denis Laviolette during a recent interview with Benzinga. “It’s effectively a closed-end fund, where we don’t have the pressure of redemptions, we don’t have people who have to put their money in and take their money out. It’s a publicly traded basket of capital,” he said.
"On the other hand, it’s a media group. And, so we’ve got CEO.ca, Northern Miner, Mining.com, The Canadian Mining Journal and DigiGeoData. Those are all platforms designed to just give us reach, right, and the idea with that is that we want to get those things into a place where we’re capital-positive with those divisions. If you can imagine a world where on one hand we’re investing and gaining exposure to mining and mining markets through active investing and deal flow. On the other hand, we can replenish some of those dollars with the cash flow that comes out of these subsidiaries and the media group.
"What happens is if we transition into a bull market, and hopefully the broken clock is right for us at some point, and we’re betting on that, and if we transition into a bull market things change really quickly, capital becomes very plentiful, and it becomes competitive.
“The blend of these two things is really important because these two elements create a type of hedge fund,” Laviolette said, adding, “We feel through our podcast, through our media and distribution arms and through our investment portfolio that we’re going to be really well poised to maintain and protect that deal flow and protect our orders so we never get knocked out of our seat.”
“The other appendage that we have, which makes it even more of a bit of a Frankenstein, is that when we sold our AI business originally,” Laviolette said, while briefly discussing the technology EarthLabs developed to help companies leverage their data to drill the best targets, “we ended up with a fairly robust royalty portfolio.”
“It is an element of value in our business, where we have some pretty compelling royalties. Like, we have a royalty on New Found Gold Corp NFGC for instance, which is a very hot story, it’s a very marque story and it’s quite a coveted royalty.”
Speaking about the unique advantage of EarthLabs' business strategy, Laviolette drew comparisons between his company's diverse approach and the broad product range of General Electric, as well as the versatility found in mixed martial arts.
“I think if we look at sports, for instance, like in the UFC, mixed martial arts, it used to be the boxer versus the sumo wrestler, the karate guy versus the Brazilian Je Jitsu guy, and now the best champions, the best fighters in that game are well-rounded. They rip their favorite pages out of all these books and glue them together to make themselves better and I think that element’s missing out of business in general,” Laviolette said, adding "I think that we’re trying to be really well-rounded. We’re trying to have different elements of our business bring all these things together to have a competitive advantage."
When asked if EarthLabs takes the same multi-faceted approach when choosing which mining companies to invest in, Laviolette said the company is both agnostic and fundamentalist.
“We search for projects at various stages,” he said, adding that EarthLabs’ focus is really heavily weighted on small caps and that they like to buy alpha projects with very strong management teams who have access to capital.
Laviolette On The African Commodity Market
Laviolette sees a number of issues on the horizon for the U.S. in its attempt to invest in Africa.
“The U.S. is going to be leaps and bounds behind China, China has been investing, and India for that matter as well, but China and India have been investing huge in African infrastructure across many nations for the better part of three decades and they’re leveraging that infrastructure to gain a toe-hold in the agricultural space and also in the mining and metals space.”
Governments around the world are implementing various strategies to secure critical minerals as the green energy transition accelerates and most recently, the U.S. has taken an interest in the African continent. Earlier this month, a U.S. delegation participated in a significant mining conference in South Africa, indicating an effort to counter China's dominance. The delegation comprised officials from the Treasury and State departments, along with the chair of the nation's official export credit agency.
Despite the U.S. interest, “the African continent is also ground zero for a lot of illicit money and money laundering on a world stage,” he said, “and that is not to be downplayed.”
“There was a great documentary that came out from Al Jazeera that covered this in quite a lot of detail,” Laviolette said. “Effectively you’ve got huge amounts of illegal money from illicit business across the world, whether its gangs in China or gangs in Russia, or India, it could be phone scam money,” he said, adding that that money “effectively comes through, illicitly, into Africa, is used to buy gold and then the gold is exported back out to those markets as bullion and it’s now ‘clean.’”
This will pose a problem for the U.S., Laviolette said. “That’s an interesting thing that clouds that space, And, so the U.S., coming in now, with strategic investments, to try to establish a toe-hold and to buy favor, I mean, they’re up against some of the most wealthy illicit guys in the world who have put themselves together, plus China.”
“The U.S. and the West have also been leveraging ideological viewpoints on climate and carbon as a narrative, which has angered the African leaders,” Laviolette said.
“You have the Sovereign Wealth Fund in Norway, which is largely, entirely established by oil in the North Sea, virtue signaling,” he said. “And now African projects, whether they be coal or petroleum projects or other things should be held to higher levels of scrutiny and should be held to higher levels of environmental standards and responsibility and, in fact, in some cases shouldn’t be done at all.
"[The West] is blockading capital to come into other aspects of their economies and they’re sort of holding them hostage over those issues, and I think those African nations are looking to China and looking to Russia, who aren’t doing that. The BRICS nations are not doing that to them, and [Africa] is not going to be easy for us."
“But I do think that as far as metals and mining is concerned, [Africa] is one of the wealthiest places on the planet and rife with potential,” Laviolette said, adding, “The next 50 years looks pretty bright for them.”
Laviolette On Mid-Cap and Small-Cap Space
Asked when a cycle down from the soaring tech sector into the mid-cap and small-cap space may start to take place, Laviolette said he “would probably be looking for a lot of the same signs as everyone else.”
“You’d think when we saw failing banks like in 2023, when more banks failed than ever in the United States in a shorter amount of time and there’s been so much chaos in this sort of fiscal environment. Debt has completely spiraled out of control, the government spending has spiraled completely out of control and all of us are aware of these things and they should rightfully be signals that we’re going to see this mass inflection point where everyone’s suddenly going to dive into fungible things like metals and gold and silver as almost a safe haven against a collapsing market.
“We have a huge amount of optionality baked into EarthLabs for exposure for when that day comes, but I don’t know what’s going to be the straw that breaks that camel’s back.”
One issue Laviolette sees with the lack of positive movement in the metals and minerals space is the inability of U.S. retail investors to be able to access Canadian junior miners.
“It’s really hard for them to be able to buy Canadian junior mining stocks on those platforms (Robinhood, etc).” As well, “the crypto market did a really good job of captivating the interest of the younger generation, mining isn’t, it should be, but it’s not.”
“How do we address that? It’s gotta be made easier to access. The fact that you have to open up a press release and read through geological jargon and all this bulls**t with like X amount of grams over X meters makes the learning curve really steep and we’ve gotta do a better job simplifying it.
“That’s really the north star of EarthLabs too, from the media group side, that’s exactly where we’re going. We’re trying to craft tools, widgets and things, like if we can give a Rotten Tomatoes score on a press release after we’ve looked at the technical jargon and the numbers and crunched that into something people can just look at and see that it’s a six out of 10 or a seven out of 10 (...) it can shorten that learning curve.
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Photo: Created with images from EarthLabs and Unsplash
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