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Bullion Index – Precious Metals

Palladium: Nero Resource Fund’s Contrarian Investment Strategy

In the world of precious metals, one investment strategy stands out for its boldness and contrarian approach – Rusty Delroy’s focus on palladium. Delroy, the co-portfolio manager of Nero Resource Fund, based in Cottesloe, has made waves with his unconventional investments. His current interest lies in the platinum group metals sector, particularly palladium, a metal that saw unprecedented price surges a few years back, reaching over US$3000 per ounce amidst sanctions against Russia, the largest producer.

However, the subsequent years witnessed a downward spiral in palladium prices, leading to a scenario where half of the world’s palladium producers are operating at a loss. Despite the challenging market conditions, Delroy remains optimistic about the future of palladium, foreseeing a potential rebound. He believes that the current price levels present a favorable entry point for investors, with limited downside risk and significant upside potential.

Delroy’s investment thesis is supported by supply-side dynamics, with many major producers facing financial strains. Companies like Anglo American Platinum and Impala Platinum have reported significant drops in earnings, signaling the need for supply cuts. Delroy emphasizes the importance of understanding cost curves in commodity investing, highlighting the imminent need for producers to make tough decisions to sustain their operations.

On the demand side, Delroy challenges the prevailing narrative of a sharp decline in demand due to the rise of electric vehicles (EVs). He points out that the shift towards EVs has not translated into a significant reduction in PGM demand, especially in markets like China where hybrid vehicles still rely on palladium. Moreover, projections from the World Platinum Investment Council suggest potential deficits in the platinum market in the coming years, further supporting Delroy’s bullish outlook.

In terms of investment opportunities, Delroy is eyeing stocks both locally and internationally. While there are ASX-listed companies like Zimplats Holdings and Chalice Mining in Australia, Delroy is also looking at overseas prospects. Tharisa Minerals, listed in London and Johannesburg, and Bravo Mining Corp on the TSX are among his top picks. These companies, with their strategic assets and strong management teams, present attractive investment options in the palladium and platinum space.

In conclusion, Rusty Delroy’s contrarian stance on palladium reflects a deep understanding of market dynamics and a keen eye for emerging opportunities. As the palladium market navigates through challenges, Delroy’s investment strategy offers a unique perspective that could potentially yield substantial returns for savvy investors willing to embrace the risks and rewards of this volatile market.

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