If we look at the bottom half of the above chart that displays soaring commodity and food prices, year over year (June 2020 to June 2021) we can observe that the prices of nickel, zinc, copper, aluminum, iron ore have all soared yoy by 40%, 50%, 60% and even more than 100%. Even with these soaring prices, the prices of aluminum and zinc are still under $3,000 per tonne and copper is still under $9,000 per tonne. Nickel is the winner for highest prices at about $19,580 per metric tonne. In the past, I’ve spoken about how gold dore had been targeted for theft by drug cartels in Mexico that apparently understand economics much better than billionaires like Warren Buffet, Bill Gates and Charlie Munger that all have consistently denigrated gold as a dumb worthless rock. For example, Pan American Silver, Torex Gold Resources and McEwen Mining are just three mining companies operating in Mexico whose mine ores have been targeted by drug cartels for theft in the past, with the largest score I’ve read about being an $8.5M theft of about 2,000 pounds of gold dore from McEwen mining in 2015 in Mexico. With gold prices now 50% higher than then, that score would now be worth $12.725M, not $8.5M. Bill Gates, Warren Buffet and Charlie Munger should take investment lessons from drug cartels, since they obviously understand gold far better than any of them.
Since a metric tonne is approximately 2,200 pounds, criminals could steal one tonne of gold dore worth $12.7M or one tonne of nickel worth $19,580. Consequently, do I believe that criminals will begin targeting base metals for theft now that their prices are rising rapidly? The answer to this question depends upon the nations in which mining operations are located. Since Peru is one of the top two largest producing nations for copper, and security issues have notoriously been a problem in South American mining operations, perhaps transports of copper ore will become a target of criminal entities in the near future.
However, because two of the top nickel producing nations, Indonesia and the Philippines, have State authorities that are notoriously brutal towards drug users and dealers, drug cartels in these nations don’t have the power they exert in other Narco States around the world. Does this mean that the nickel industry will remain immune to theft? Not at all. Theft will just materialize through different channels, especially since many State governments around the world act more like mafias than institutions that serve their citizens. In the cases of nations that are centres of large base metal mining operations, I fully expect the political leaders of these nations to enrich themselves by significantly increasing mining royalties/taxes, extraction, and export taxes including VATs on exports and basically any other tax pools that would enable them to dip their hand into the cookie jar for their own personal enrichment. So expect mining taxes to soar in such nations as means of silent extortion of mining profits, especially as government coffers dry up due to extended continued and rolling lockdowns.
In nations that have been engaged in never-ending, unwinnable “drug wars”, like Mexico, expect a more sinister consequence from current soaring commodity and food prices. Drug cartels will almost assuredly engage in more and more illegal mining operations of base metals, like iron ore. For example, more than nine years ago, in 2013, Mexican drug cartels, including the notorious Knights Templar cartel, reportedly earned more than $1 billion of profits from selling iron ore and exporting it to Asia and other regions around the world. It is near guaranteed, that with base metal prices exploding 108.8% yoy, drug cartels have expanded their illegal and highly profitable mining operations. In fact, due to the illicit and increasing drug cartel activity in many mining operations around the world, the unspoken secret known in the mining industry is that protection “taxes” paid to cartels to ensure safe transport of dore and other unprocessed ore from operating mines to refineries, as well as losses incurred from competitive illegal drug cartel operations, all have inflated AISC (All-In-Sustaining-Costs) to mine an ounce of metal for decades now. Often, such additional “expenses” are buried in other line-items on the balance sheet instead of being included in the AISC, even though dealing with drug cartels is a de-facto cost of many mining operations across the globe today.
This two-part series clearly exposes the fact that mainstream media consistently lies on behalf of the global oligarchs at whose troughs they feed. Many times, when I speak of the trillions of dollars flooding the o/n repo markets or the trillions of dollars printed by US Central Bankers or the more than $29 trillion US Central Bankers gave to banks, both domestic and foreign, to bailout the global banking industry after the 2008 financial crisis, people just dismiss the stats because they really can’t visualize or comprehend what the creation of one trillion dollars by Central Bankers mean to USD purchasing power devaluation that materializes as soaring commodity and food prices, yet comically low reported “official” inflation rates.
Consequently, please click on this link to view an awesome visual of the $10 trillion US Central Banker printed in 2020 alone. Perhaps this will tell you why no other nation in the world wants to keep using USDs for purchases of oil or international trade. Did crude oil prices really soar this year or did nearly every commodity soar 30% to more than 100% in the past twelve months because the USD purchasing power is rapidly collapsing? Furthermore, if you read my above linked article, then you should laugh out loud when you hear present “official” reported US annualized inflation rates of 5.4%. Though the media reports these inflation rates as “soaring”, even a second grader that was taught basic economics could figure out these “official” inflation rates under report REAL inflation rates by many multiples. And the same goes for “official” inflation rates in Germany, Spain, France and the UK of 3.8%, 2.9%, 1.5%, 2.5% and 3.8%. All of these global inflation rates also under report real inflation rates in their nations by many multiples.
And if the oligarchs regularly lie to us about key economic statistics, then what other statistics do you think, so prominent in the news all around the world today, they may also be lying to us about?
