Saxo: ‘Two-lane’ mining sector favouring producers as juniors hit the skids

A ‘two-lane’ mining sector is seeing rising exploration costs favour producers with deep pockets while juniors continue to struggle amid an increasingly long period between first discovery to first metal.

Saxo Head of Commodity Strategy Ole S. Hansen says robust demand and production challenges are expected to continue providing support in Q3 2024 across all commodities, with energy and grains poised for growth.

However, the metals sector – including gold and copper – is expected to “take a breather” in the third quarter after hitting record highs. Hansen also maintains his call for gold to sit at US$2,500 ($3,721) per ounce by the end of 2024.

Speaking to, Saxo’s Head of Commodity Strategy says that gold and silver may still surprise to the upside should economic data continue to soften, thereby leaving the door open for an earlier than expected US rate cut.

“This may in turn invite back investors who focus on funding costs – a group that has been absent since 2022, when the US Fed began its aggressive rate hike cycle,” Hansen tells this news service.

“Copper needs to see demand bring down exchange-monitored warehouse stocks from the current four-year high before moving higher. We suspect that will not occur during the current quarter.”

Copper reached a record high earlier this year. While Saxo’s strategists believe in the long-term upward trajectory, current soft demand in China, where stock levels have risen to pandemic-era highs, suggests that the timing was off.

Yet few junior exploration companies have reaped the rewards of that higher copper price environment.

As Saxo Chief Investment Strategist Peter Garnry highlights in his equity outlook, the electrification of the world is a “game-changer supporting copper” – the number one conductor of electricity.

However, Saxo’s strategists note that while the long-term outlook points to higher copper prices, the short-term outlook needs to improve before prices eventually move higher, a development it says is unlikely to emerge in earnest before 2025 and beyond, when the funnel of new supply begins to dry out.

“The gold and silver surge during the first half year may trigger a period of consolidation, while investors adopt to higher prices. But overall, we see no major change in the reason for owning precious metals, and with the prospect of US rate cuts during the second half inviting back ETF investors, a net selling group since 2022, we see higher prices at year-end,” Saxo’s report says.

“Central bank buying, one of the major engines behind the gold rally in recent years, may also slow in the short-term, as highlighted by the People’s Bank of China, which halted purchases in May after 18 months of non-stop buying. We maintain our end-of-year call for gold at US$2,500 per ounce, while raising silver to US$35 per ounce.”

Gold remains one of the best performing assets so far this year, ranking second behind US stocks, which is up nearly 16% year-to-date. The World Gold Council has released its Gold Mid-Year Outlook 2024, revealing the precious metal has risen by 12% year-to-date (15% in AUD), surpassing most major asset classes, as reported

Yet most junior gold explorers and even some producers wouldn’t know gold’s price has been soaring. On 1 July, shares in Calidus Resources (ASX:CAI) were suspended from trading after the ASX-listed gold miner collapsed with receiver KordaMentha now taking the reins.

Calidus has several gold and lithium projects in the Pilbara and up until recently had a market capitalisation of $89 million with its shares trading at $0.12 apiece. In April 2022, those shares were $1.02 each. The company was primed to restart operations at its Nullagine Gold Project, in mid-June unveiling a maiden resource estimate measuring over 475,000 ounces.

Despite record-breaking prices and remaining a top performing asset, the World Gold Council reports the global economy and financial markets are in a transition period. 

Tempest Minerals (ASX:TEM) Managing Director Don Smith says there’s a few factors at play creating these two diverging lanes in the resources sector.

“One is the costs in Australia, it’s crippled the sector, it’s absolutely out of control. I believe that we are bordering on, if not already, not being competitive with the rest of the world because of a regulatory issues and costs,” Smith tells

“I think that is a real threat for Australia at the moment. A good example of that is the nickel industry, which is obviously not doing great, but in our northerly neighbours in Indonesia, the nickel industry is absolutely going nuts. That’s because they’ve got good long-term strategic thinking.”

Smith says not only is Indonesia a lower cost environment, the government has spent many years setting up infrastructure to develop a downstream processing sector, which adds as a competitive advantage for many reasons including cost efficiencies.

Lingering inflation may be crippling consumers and many junior explorers; however, it seems to be doing wonders for silver – the precious metal has gained more than 34% over the past six months. In late May, silver hit its highest point in 12 years, climbing to a 2024 high of US$32.42 ($48.81) an ounce. 

Australia is a key producer of the precious metal silver — it was the world’s fifth largest producer in 2022.

Sprott Asset Management Senior Portfolio Manager and CIO Maria Smirnova says silver has been following closely behind gold’s rally. She says both precious metals have been buoyed by the prospect of easing monetary policy in the US, rising geopolitical turmoil in the Middle East, and central bank buying, particularly from China.

The Silver Institute sees silver demand rising 2% this year because of its dual purpose as a key element in the clean energy transition.

the road ahead

A similar scenario of the haves and have nots is also playing out in the ‘two-lane’ global economy, according to Saxo’s strategists.

Unsustainable fiscal spending and geopolitical risk could cause “surprisingly resilient economic growth” in the US and elsewhere to topple like a sandcastle, Saxo’s global strategists declare in this quarter’s Quarterly Outlook report.

Saxo’s strategists are neutral for Q3 2024 but they warn even the lightest ocean wave – particularly those which impact outperforming sectors such as defence, artificial intelligence and obesity drugs – could cause the economic sandcastle to collapse.

At the same time, they argue a calm macroeconomic outlook over the next three months – leading into a critical Q4 2024 and November’s US election – should prompt investors to reconsider their short-term asset allocation and favour riskier assets, such as equities.

In his outlook, Saxo Chief Investment Strategist Peter Garnry explores the concept of a “two-lane economy”, outlining how the disparity between thriving and struggling sectors can complicate monetary policy and the battle against inflation.

Saxo’s Hansen tells the ‘two-lane economy’ concept can be applied to the mining sector where increasing exploration costs are favouring producers with deep pockets, especially the majors, while the minors are struggling amid an increasingly long period between “first discovery” to “first metal”.

“Our call for some high-flying metals like silver and gold to take a short-term breather before moving higher to reach our year-end targets are based on the assumption that investors need time to adjust and adapt to higher prices

To this end, some commodities in which prices have been soaring could experience a slight pullback as investors adjust to a higher price environment.

Our call for some high-flying metals like silver and gold to take a short-term breather before moving higher to reach our year-end targets are based on the assumption that investors need time to adjust and adapt to higher prices,” Hansen says.

“Central bank buying has for that reason slowed, led by the PBoC’s (People’s Bank of China) recent buying pause. The duration of this pause will depend on interest rates, economic conditions, and geopolitical factors. Copper is more clear-cut, with short-term weak fundamentals clashing with long-term bullish expectations.”

Saxo’s Quarterly Outlook report notes that in June, the Fed began to ease the pace of their quantitative tightening (QT), while the Treasury Department initiated US Treasury buybacks to enhance market liquidity.

Despite these efforts, Saxo expects US Treasury yields to remain elevated until inflation trends decisively return towards the 2% target.

“If the economy cools, support for US Treasuries may increase, but the Fed’s reluctance to make significant rate cuts will likely counterbalance this demand,” Saxo’s report says.

“Meanwhile, Europe’s inflation rate has fallen below that of the US, allowing the ECB to potentially adopt less restrictive monetary policies, even though inflation remains above its target. This sets the stage for the upcoming quarter, with potentially growing divergence between the US and Europe.

“Although the interest rate differential between the two regions has widened significantly this year, forward swap markets predict these spreads will converge over the next three years, suggesting that increasingly divergent monetary policies are unlikely. However, if Eurozone inflation continues to moderate relative to the US, interest rate differentials could return to pre-pandemic levels, leading to steeper yield curves in Europe.”

Saxo Head of FX Strategy Charu Chanana argues a USD bearish trend will persist into Q3, with US Federal Reserve policy easing “a question of when, not if”.

Saxo’s macro assessment suggests a positive outlook in the short-term, ahead of the crucial Q4 2024 featuring the US election.

“A calm macro-outlook in the short run, combined with a low financial turbulence indicator, makes us favour a tactical asset allocation view that is overweight risky assets,” Saxo says.

Write to Adam Orlando at

Images: Unsplash, Stock & Saxo
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Written By Adam Orlando Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.