Title: The Invisible Metal — Event Driven Optionality in "Paid to Wait" Expressions Show: Paulo Macro (Substack) — paid Guest: Paulo Macro ("Cloudbear") Date: 2025-NOV-16 URL: https://paulomacro.substack.com/p/the-invisible-metal Length: written post (no timestamps) Note: Back-filled post (processed 2026-JUL-07; predates most of the source's archived posts). Despite the "Invisible Metal" title, the idea is LONG NICKEL — an "invisible," surplus, high-inventory commodity with concentrated (Indonesia + Russia) supply and growing event/headline risk. Lays out his mining checklist and two "paid to wait" event-optionality expressions: Talon Metals (TLO.CN) and Magna Mining (NICU.CN). Body reproduced for personal study; Substack chrome removed.
To start with some housekeeping: I appreciate everyone's patience with the lack of published notes over the past few weeks. My trip to Asia was highly successful and educational, but I returned quite ill and recovery has involved two steps forward, one step back. I don't know why Covid always hits me this way…you think you're better for a day or two, and then a few days later — bang, lousy again and back to bed. Thank you for the good wishes. Starting to feel much better now!
I have several other notes, charts, and ideas coming, but in the meantime the gents at Money of Mine podcast had me back for my second discussion with them on commodities (it had been a year since my last one). After a long patient wait on their part, we managed to get it done Tuesday evening. You can find the conversation here, with detailed discussions on copper, uranium, oil, and more… I hope you enjoy it!
There is one particular commodity I have thus far not discussed publicly and am ready to share with readers now. Most of the work on this idea was done in preparation for my trip to Hong Kong where I presented the thesis in front of several friends. We were graciously hosted in an informal gathering by our friend Louis Vincent Gave of GaveKal to whom I am eternally grateful for his hospitality, coordination, and friendship. Today's note lays out the thesis, and I look forward to any and all insights, feedback, thoughts, reactions, and pushbacks you might have! With that, let's get into it…
"No one is paying attention." — Jared Vennett in The Big Short, played by actor Ryan Gosling; character based on Deutsche Bank's Greg Lippmann, structured products salesman during the 2000s housing bubble
The idea is long nickel, and you can find the full slide deck which I used for my Hong Kong presentation here. I have copied the more relevant slides below to help make the thesis here a bit more accessible. Please note the presentation was prepared around Oct 23rd, so price charts may have somewhat changed and I have not had a chance to update them all.
Starting with some general background: as you can see, nickel has experienced a few significant spikes over the past 25 years, but has flamed out and gone invisible over the in the aftermath of an epic LME short squeeze in 2022.
Most striking to me is that even with the smash in April after Liberation Day, nickel has traded either side of $15,000/ton pretty much all of 2025. Quite a base! But stability begets instability, and as platinum showed us: the longer something coils and builds a base, the more powerful the move out of a range when it finally happens.
On supply and demand, all you need to know is that Asia drives both — 87% of global primary demand comes from Asia (predominantly China at 64% with another 23% from Japan, Korea, and India). US + Europe combined are less than 10% of global demand, which is mostly met from recycling. The key demand drivers are stainless steel (consumer goods, kitchen works, etc), and in recent years, batteries. If Asia grows, so does nickel demand, so if you believe in the Asian Boom thesis as laid out by my friends Louis Gave and Ferg, you are buying into this trend with nickel.
The more interesting side of the equation is supply. On the surface, there is no reason to own nickel. In fact, you would be crazy to. 2025 is the fourth year in a row of a supply surplus which is expected to persist for another five years — an unprecedented 9 years of supply exceeding demand. Analyst Jim Lennon of Macquarie noted as much at LME week last month:
"I don't think any market has ever been in surplus for nine years in a row, which is what we're currently forecasting. Normally, something happens to correct that."
However, it is the concentration of supply and its expected future growth that attracted my attention. Thanks to a huge increase in nickel laterite production, Indonesia today accounts for over 65% of global production vs. 30% at the onset of Covid in 2020. This makes nickel the most geographically concentrated commodity supply story among all major metals — and it's not even close. Russian palladium? Maybe 40%. Crude oil? The Saudis + Russia + US gets you ~30MMbpd in a ~105MMbpd market… let's call it 30%. Sure you could say rare earths are mainly China where 65-70% is mined and 90% is refined. While these are critical to many industrial and military applications, they are not major commodities measured in millions of tons annually.
Today, Indonesia controls more nickel supply than OPEC did in oil at its peak in 1973.
Just as importantly, 40% of nickel production is cashflow negative at the current $15k/ton price, a figure which includes some Indonesian production that is lossmaking. This is an unsustainable condition for any industry. Indonesia's supply growth has been such a disaster for the global nickel industry that output outside China and Indonesia is the lowest since 1990, and half of the world's nickel production has shut down over the past three years. Keep this 40% loss figure in mind when you look at the nickel cost curve from Jaguar Mining below. The green denotes traditional sulphide production while gray is laterite; the negative green cash cost on the far left is Russia, where Norilsk accounts for 7% of global production but has significant copper/PGM byproduct credits.
Bottom line: at least 70% of global nickel production comes from Indonesia + Russia. You see where this is going…if we think in terms of "anti-fragile," nickel production seems pretty far from it. Nevertheless, industry analysts continue to see surpluses out to 2030.
The bearish supply outlook is compounded by copious inventory. Again, you would be crazy to even bother with nickel — the situation would seem hopeless with ~300kt of metal sitting on LME and Shanghai exchanges (approaching 10% of global annual production).
Nickel is decidedly not uranium or platinum — commodities running embedded deficits for several years amidst rising demand — or even copper for that matter which now faces growing deficits in the coming years. These commodities would seem to be far easier trades. So why bother with nickel?
Well for starters it is invisible, and you would be hard-pressed find a bull making a case defending it. And as I hinted above, there are key points of fragility in supply which could turn an oversupply projection into a deficit rather quickly. For most investors, it is probably easier to "wait for confirmation" and leave some money on the table. But in seeking out the best way to express the view, I think I have found ways to limit downside or make some money, while being prepared for serious torque if a tail situation were to materialize.
What is the tail case? In this case, as you have guessed by now — it's supply disruption out of Indonesia.
In August, Indonesian lawmakers voted themselves new housing allowances while the country is suffering from austerity and rising living costs. Protests broke out and a taxi driver was killed after being struck by a police vehicle. What started as local protests exploded into demonstrations across the country, prompting a crackdown that resulted in over 10 fatalities, widespread rioting, and damage to several government buildings. President Subianto replaced his security and finance ministers, reshuffled his cabinet, and used the military to aggressively crack down. The situation has since quieted.
Running parallel to this social unrest, the government has begun to tighten its grip on the mining sector in 2025, in part for budgetary reasons. This wasn't the first time Indonesia has taken a hardline stance toward mining (restricting concentrate exports and insisting on Freeport processing ores in country, etc). But this year has seen a notable crackdown on illegal tin mining that resulted in ~1,000 illegal mines closed and 6 smelters confiscated and handed to the state producer PT Timah. Refined tin output has fallen over 30% YoY in 1H25, and tin prices have rallied.
Then of course came the Grasberg block cave collapse on September 8th. For now, Freeport asserts that they will begin to ramp lost production back up in 2026, and the government has not pushed back hard with any significant reaction. However an independent investigation is underway as lawmakers call for stricter standards. There is always a risk of increasingly negative outcomes as we saw with the fallout from Vale's tailings dam failure at Brumadinho in 2019 where fines and penalties continued to grow over the years.
Now it appears nickel may be in the crosshairs. The government has seized a few nickel assets and begun reviewing environmental permits. Environmental risk is a key issue here. As you can see from slides 24-26 in the deck, the nickel laterite mining and processing industry is extraordinarily pollutive. Interestingly, Rick Rule noted this on a Resource Talks appearance in early October saying:
"I think that the price competition from laterite nickels fades. A year and a half ago, I flew over southern Sulawesi which is where the epicenter of the laterite nickel boom is taking place. Nobody should confuse me with Greta Thornburg — I don't think anybody will. But the environmental devastation that is being done by the lateritic nickel industry in Indonesia is really truly unconscionable, and I don't think that the Indonesian citizenry — I'm not talking about the elites, but the citizenry — or the government is going to tolerate it for too much longer. If you have responsible mining standards around the nickel laterites or if you have an increase in the oil price, or both, the cost of producing nickel laterites begins to soar which puts a floor under nickel prices."
At LME Week, Jim Lennon of Macquarie also said something similar:
"We get the impression that the Indonesian government is looking at how they can control the market. So towards the end of the year, we could go through a period here you see a number of mines being curtailed for environmental reasons and other mines not getting environmental permitting."
It is worth noting that Indonesia has already announced a return to a 1-year quota approval system vs the prior 3-year term. In other words, a producer has to reapply for a quota each year, rather than producing for 3 years before renewing. The wavelength for government interference is shortening.
And just last weekend after my return from Hong Kong (so not mentioned in the deck), local press reported "Following the Tin Case, Prabowo is Now Monitoring Illegal Nickel Mining in Morowali." The Forest Area Regulation Task Force (PKH Task Force), encompassing various ministries including the Ministry of Defense and the TNI, has begun regulating illegal nickel mining areas in Morowali, Central Sulawesi (November 4, 2025) — as was done with illegal tin mining in Bangka Belitung.
As usual, no one is paying attention. There is a clear headline risk here where one day perhaps Indonesia announces a significant crackdown on nickel laterite mining, and suddenly voila… the anticipated 100-200ktpa surplus magically disappears and flips into a deficit, and exchange inventories begin to draw. It's worth noting that in July the International Nickel Study Group (INSG) revised down its projected 2025 surplus from 200kt to 130kt. Reminds me a lot of copper in 2023-24… start the year with a big surplus, and watch it whittle it down by year end.
Also important to note: nickel laterite mining is extremely energy/oil intensive. If you believe as I do that the oil price is set for exciting bullish trends in 2026-28, low cost Indonesian production which analysts take for granted could very well turn increasingly unprofitable.
So we have a commodity in surplus with elevated inventories, but significant event risk. How do we play nickel other than owning LME futures, which in any case is an extremely expensive position given the roll carry you pay due to the unsurprising contango?
Since LME futures cost too much to hold and are inaccessible to most of us anyway, I decided to dig a little further. I started with the Sprott Nickel Miners ETF (NIKL), which was relaunched in early 2023 and holds a laughable $22mn in assets (like I said — invisible). The ETF remains down approximately -30% from its launch and is concentrated, with the top 10 holdings accounting for 77% of the fund.
As you can see, several of the top holdings are either Indonesian listings (sorry, no… jurisdiction, jurisdiction, jurisdiction). #2 Nickel Industries (NIC.AX) has its assets mostly in Indonesia, so same issue. IGO Ltd (#3, IGO.AX) has assets in Australia, but at A$5bn market cap it's already a large company, and I'm looking for a bit more torque in the sub-$2bn range. Which brings me to the #6 and #7 holdings — Talon Metals (TLO.CN) and Magna Mining (NICU.CN).
The last few slides in the deck give you the quick and dirty on both, but I will lay out my Sparks Notes in more detail on each below. Before I tackle each though, remember the checklist from my writeup on Aldebaran Resources a year ago:
For me the list of what matters in a very challenging sector is really simple: - Jurisdiction - Jurisdiction - Jurisdiction - Management Track Record - Alignment (backers) - Asset (or Portfolio) … in that order.
Talon Metals (TLO.CN, C$0.39)
Market cap C$550m/US$390m fully diluted. ADTV US$2mn. No debt, US$25mn in cash as of mid October.
Key holders (alignment): 13% Pallinghurst (UK battery metals specialist fund); 8% Strategic Investor (undisclosed); 5% Rio Tinto; 3% Mgmt — skin in the game.
Jurisdiction: Talon owns 51% of the only nickel development in the US. The primary asset is Tamarack in Minnesota, with a processing facility being built in North Dakota, and a promising exploration play in Michigan.
Management: Includes Vale's former chief geophysicist and former Rio Nickel mgmt.
Strategic partners (alignment): Rio Tinto owns 49% of the Tamarack JV and 5% of Talon. If Talon delivers a feasibility study (FS) and US$10mn payment to Rio by March 2026, they earn another 9% to make the JV 60 Talon/40 Rio. Tesla has offtakes from 2028.
Talon is Trump adjacent, with $115mn in loans coming from DOE and $3mn grant from the DLA. Nickel is now on the 2025 Critical Minerals List.
Assets: The deposit is extremely high grade, and increasingly looks like it can scale to a degree rarely seen in traditional nickel mining. Last week TLO announced new drilling results that implied 390m at 3.2% Ni (6.1% copper equivalent). This is an enormous result, and the market didn't care because the mining sector was getting annihilated when the release came out on November 4th.
Economics on the project are out of date given the drilling done over the last few years, but a PEA released in February 2021 using $17.6k/t Ni and $3/lb Cu came in at $520-569mn NPV for the Tamarack asset. Granted, Talon will eventually own only 60%, but significant progress has been made over the past four years, $3/lb copper is ancient history, and the Feasibility Study in 1Q26 should show significant additional resources since then.
A buddy forwarded me this open note from substack writer Whalehunter Capital whom I do not know, but I would recommend a read of the note for those interested as I found many of the details exciting to say the least. I particularly liked his contextualization of the connections between Orion (PE firm tasked by Trump with mining investments), Sweetwater Royalties/UPX, and Talon at the Michigan exploration asset Boulderdash. Talon has all the hallmarks of a situation where I wake up one day and read headlines about how the US government has taken a 10% stake in the company in exchange for a nickel offtake, minimum floor price, etc etc. There is no other nickel development asset in the United States, and this is a critical mineral. Plus there's some cobalt, platinum, and palladium in there as well in addition to attractive copper grades…
Magna Mining (NICU.CN, C$2.39)
Market cap C$625m/US$450m fully diluted. ADTV US$2mn. No net debt.
Key holders (alignment): 19% Dundee Corp; 34% Other Institutions; 7% Mgmt — major skin in the game.
Jurisdiction: Magna operates and develops base metal assets in the historic Sudbury Basin district of Ontario. Neighboring properties belong to Glencore (Falconbridge/Xstrata) and Vale (Inco).
Management: CEO Jason Jessup is ex-Inco and knows the Sudbury region thoroughly. Also ex-Sandstorm and FNX which he sold to Quadra/KGMH for $2.9bn in 2012. Chief Geo David King is ex-FNX/KGMH.
Strategy & Assets: CEO Jessup develops low-capex brownfield or past-producing assets in a developing base metals growth platform. These properties were previously considered marginal to majors but with proven drilling success are showing to be significantly leveraged to higher base metals prices.
Combined resources are approaching 1bln lbs copper, 1bln lbs nickel, and 2.6mmoz of platinum, palladium, and gold. The nickel can be stockpiled, and management's intention is to wait for higher nickel prices to sell into. In the meantime, copper pays the bills.
McCreedy West is already producing and generating cash, with other permitted developments in the pipeline.
NICU trades at 5.6x PE27E, 2.6x 27E cashflow and 2.5x 27E EBITDA on the current price deck. Beyond cheap.
Conclusion
Nickel is invisible, and for good reason: the supply outlook and current inventory trajectory leave little to like. Waiting for the market to tip into deficit and begin to drain inventories could take years. Buying the metal outright therefore does not seem particularly attractive, especially when tighter supply/demand stories are available in other commodities such as uranium, platinum, and copper. This trade is not for the impatient!!
However the concentration of global production between Indonesia (65%) + Russia (7%) have created potential event/headline risks to supply that could quickly change the consensus outlook for extended surpluses, and this event risk is growing. If the situation were to change in Indonesia (which may already be happening), the past in tin could be prologue for nickel.
Talon and Magna Mining are idiosyncratic stories with specific catalysts that could "pay you to wait" while waiting for nickel supply problems with Indonesia to manifest and lift prices.
For Talon, the feasibility study due in 1Q26 could be an eyeopener given new discoveries at depth at Tamarack. Continued exploration successes at Boulderdash in Michigan may seem tangential, but strategic partnerships there with Trump-adjacent UPX/Orion is notable. The existing loans/grants with the DOE and DLA mean the stock is simply too Trump-adjacent to disregard for critical metal "meme potential," particularly since it controls the only nickel asset under development in the US.
With Magna, you have a rare management team with a track record for buying and developing a platform of mines that are later sold to a major in late cycle. The jurisdiction and alignment with management and major institutional shareholders check out, and for a company trading sub-6x earnings in 2027 with a growing pipeline of projects to come, the stock is simply far too cheap to ignore. Magna gets you long copper today with a potentially huge option in nickel later.
I hope this was helpful in not just sharing an idea, but walking you through how I put a thesis together and think about finding an expression or two where I may need to wait in an invisible trade for bullish conditions to present themselves, but still own significant optionality on a potential event-driven risk with a torqued outcome while still getting paid in the meantime (I hope!).
Disclaimer: as usual, none of this is investment advice. I have positions here, so skin in the game, but I am willing to be patient and have room to build more significant size in time. I don't run money for others, so please whatever you do — make sure to crosscheck and do your own work.
As always, kindly yours,
Paulo aka Cloudbear