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The world is going to need a lot of metal to make the transition to a low-carbon economy a reality – much more than Red Cloud Securities Inc. chief executive officer Bruce Tatters believes the average financial advisor understands.

With the federal government introducing a new tax credit on flow-through shares (FTS) from miners exploring for copper, nickel and other rare earth elements needed to advance clean energy technologies, he believes the junior mining space is ripe with opportunity for investors.

Mr. Tatters spoke with Globe Advisor recently about what makes the micro-cap mining space particularly attractive following the policy shift.

What’s happening to the historically cyclical nature of the metal commodities market?

Prior to this decarbonizing trend, we lived in a world in which nickel and zinc and all the other traditional base metals were going through five to 10-year supply waves. They were never scarce for very long and if they were, it would be for six to 12 months.

We simply do not produce enough of these metals right now. What they have done is turn the old, ugly little mining sector into a growth industry.

We are in a market meltdown and copper is still $4.32 a pound, up from $2 two years ago. And if [metal prices] are not coming off in a market meltdown, just wait until we get past this slowdown.

Why does that benefit junior miners more than the big global players?

The message from the government [via the flow-through shares credit] is there is a real chronic shortage here. It’s giving enormously high tax incentives now if you are exploring for a critical metal.

We all have this going on, yet the little junior exploration and development space is still trading as if it is the same bankrupt industry it was five years ago. One of the trends has been to compress and compress the valuations of the little companies. They are ignored.

And yet, in Canada’s capital markets, there is a small micro-cap space that happens to do the bulk of the exploring and developing for the types of metals that are going to become extremely scarce over the next 10 to 15 years.

Is the idea then to buy a junior mining stock and wait for the takeout premium?

Twenty-five years ago, the Barrick Golds GOLD-N of the world would thump their chests and go out and buy everything at the top of the market, but it is a bifurcated market today.

The larger players don’t have a lot of new, incremental projects and they’re waiting for the little juniors to literally bring a project to the finish line. Then, they will pay up for it. They would rather overpay than pay earlier. Outside of my little quadrant, where it is so obvious this is coming, the Main Street people out there don’t have any clue.

This interview has been edited and condensed.

- Jameson Berkow, Globe Advisor reporter

Must-reads from Globe Advisor this week

How to play a bull case for agriculture stocks

Rising food inflation and shortages fuelled by a perfect storm of war, droughts, and the COVID-19 pandemic have put the spotlight on agriculture stocks. An expert says the outlook for the sector is “quite strong,” with long-term tailwinds as demand comes from a growing world population and disruption in globalization. Shirley Won reports on how technological innovations are making farming more efficient and sustainable and where the opportunities lie.

Sell in May and go away? Could be a good bet this year – or not

With markets volatile and sinking fast – and the S&P 500 flirting with correction territory – will the strategy of “Sell in May and go away” work this year? The old adage doesn’t often work, experts say, but it can be a good time to take a more defensive position in portfolios. Gillian Livingston weighs the pros and cons of this strategy and whether investors truly reap the rewards.

How to make the most of getting a pay raise

Facing a tight labour market, with 5.2 per cent unemployment in April, along with restless employees who may not see their jobs as fulfilling as before, some employers are raising salaries to retain talented workers. The compensation – whether in the form of salary, bonus or benefits – provides opportunities to steer clients toward the best use of the extra cash flow and help minimize any associated taxes. Alison MacAlpine looks at what advisors should watch out for and when clients should turn down an opportunity to participate in a group plan.

How to prepare aging clients for challenges related to dementia

As the population ages and cases of cognitive decline rise, a lack of financial planning now can result in difficulties for clients and their families later. There will be a critical need for more disability planning services and a redefinition of how clients view advisors, who will have a greater responsibility to play a more holistic role. Damon Murchison of IG Wealth Management and Kevin Noel of the Alzheimer Society of Canada look at how to plan adequately for the challenging life stage.

Also see:

How retail stocks went from ‘recessionary playbook’ to market casualty

How the Online News Act will affect the content advisors distribute

Investors spooked as gloom grips markets

What you and your clients need to know

Investors pull almost $5-billion out of mutual funds in market turmoil

Canadian investors pulled billions of dollars from their mutual fund investments last month while falling share prices led to an $87.5-billion decline in total assets for the industry. Mutual fund assets dropped by 4.4 per cent from March, falling to $1.914-trillion at the end of April, according to data from the Investment Funds Institute of Canada. Clare O’Hara reports on which products were hit hardest.

How TikTok changed the vibe of personal finance advice

Generation Z and millennials are getting a lot of their money advice from TikTok, where personal finance videos have more than 5.8 billion views. Audiences that feel they are traditionally ignored by the financial industry are also turning to the platform. This podcast look at why the social media network is resonating, how to use it effectively and what advice you should be wary of on the app.

CEOs at independent wealth and asset management firms see big pay increases

The billions of COVID-19 savings that flooded into Canada’s wealth and asset management industry has resulted in big bumps in pay for many of its chief executives. Top executives at nine independent companies in the sector have had an average increase in their compensation of more than 40 per cent in 2021 compared with the prior year. Clare O’Hara and David Milstead look at what that means in dollar terms and the average pay package.

- Globe Advisor Staff

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