- Royalty companies outperform the mining sector with a lower risk profile.
- Portfolio benefits from global macro drivers and hedge against inflation.
The global move away from fossil fuels is now accelerating as policy makers, government bodies, and investors are increasingly recognising that electrification is happening on a scale that was simply not envisaged even a decade ago. Accordingly, the evolution is driving demand for key commodities such as lithium, graphite, and cobalt, and other technology metals including copper and nickel.
One small-cap royalty company is well ahead of the game and has already created substantial hidden balance sheet value for shareholders in the two years since listing its shares on Aim and it provides a smart way of playing the investment upside.
Commodities across the spectrum have been benefiting from improved market sentiment, and increased end-market demand as the global economy bounces back from the Covid-19 pandemic. A rise in inflation expectations is also driving the rally given that many investors buy commodities as an inflation hedge.
As the velocity of money ramps up as economies return to some normality, and central banks around the world maintain relatively benign monetary policy programmes, then the commodity complex should continue to do well in a negative real interest rate environment. This is adding even further fuel to talk of a commodities super cycle.
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