Metals and Miners: Policy Over Price

July 8, 2026 | (12 mins 10 secs)

Markets are changing and policy is becoming just as important as price in shaping the outlook for critical materials. In this edition of Metals in Motion, Sprott's Justin Tolman explains how government intervention, supply chain security and market volatility are creating new opportunities across metals and mining, while highlighting what investors should watch in the second half of 2026.

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Video Transcript

Thalia Hayden: You're watching Metals In Motion. I'm Thalia Hayden with ETFguide. Great to see you again. Joining us now is Justin Tolman, Senior Portfolio Manager and Economic Geologist at Sprott Asset Management. Welcome Justin.

Justin Tolman: Thank you, Thalia. It's nice to be here.

Thalia Hayden: Justin, let's start with the biggest surprise of 2026. We've reached the halfway point of the year. In your opinion, what has been the single biggest surprise in the metals and mining critical material space?

Justin Tolman: I think if I had to put my finger on one thing, we've seen a change where price isn't the dominant driver in a lot of commodities at the moment, it's policy. And for most of my career, metals markets were explained by very straightforward things: geology, grade, cost curves, inventories and prices. If supply is tight, prices rise; if they rise enough, more capital comes in as new supply. And that framework is still in place. But we're seeing a really rapid shift now where governments are coming in and they're not just acting as the regulator, they're acting as the buyer, they're acting as the financier. They're disrupting the markets. And sometimes they're doing all of those roles at once. We could talk about rare earths, for example. This was a niche market, but suddenly it's exploded into a strategic choke point critical to defense. It's critical for wind turbines, robots and semiconductors. And the issue isn't China's market share. It's that China is willing to use it as leverage. This has moved rare earths from a discussion about commodity prices to one about supply chain security, almost overnight, certainly in months. But the same logic applies to different commodities globally. We could go to the DRC, which controls the lion's share of the world's cobalt, and last year, it moved to put in place an export ban. This year, they've put quotas on cobalt to control that. You could look at Indonesia, which uses export restrictions to force downstream processing. We saw Zimbabwe do something similar for lithium this year. The common thread is that critical minerals aren't just ordinary commodities anymore. They're strategic. Governments are treating them like that and this adds an extra layer of demand. Governments aren't just buying metals; they're buying security, redundancy and optionality. The speed at which we've seen this change is very important and been a surprise to many people.

Thalia Hayden: When we look at Sprott, what makes it different from anyone else in the space?

Justin Tolman: On our website, the tagline is “a global leader in precious metals and critical materials”. But I would reframe it as the global leader in natural resources, metals and mining. We were doing this back when nobody cared through the bear markets. It's been in our DNA. I'm a geologist by profession with decades of industry experience on the other end of the desk before coming to Sprott. And we bring a lot of rigor and depth to our focus. This is our sphere of competence. This is what we get up in the morning and what we think about: the universe of projects, the operators, we know which management teams have a history of under-promising and over-delivering. We know who can build mines on time. We spend a lot of time doing deep due diligence because we've got the raw technical expertise. We go out, put boots on the ground, look at the projects and engage with the operators. This is our bread and butter. I believe that if you're going to talk about natural resources, Sprott should be the starting point.

Thalia Hayden: Now, if you had to identify one area within the metals or critical materials complex that investors currently underappreciate, what would that be?

Justin Tolman: In terms of an underappreciated area? Most people probably understand the broad case for metals like gold, copper and uranium. The harder and more interesting opportunity now is filtering the universe of projects and companies to find those that can actually take advantage of this beyond just beta to the commodity price. What are the projects, and what are the special situations where the market still hasn't fully priced in the value of scarce, long-life, high-quality assets in the right place? Mining equities are a pretty inefficient sector of the market. It's technically complex. It's cyclical. It's capital intensive. It can be volatile. Lots of assets can look cheap at different times. What we're trying to do is work out which of these cheap things are genuinely mispriced, which projects have the combination of factors that will go on and become a successful mine and deliver alpha independent of the commodity price, the resource quality, competent management teams, well-managed balance sheets, those kinds of things. That's where the contrarian sort of opportunities for outperformance sit today.

Thalia Hayden: If there's one big lesson investors should take away from the first half of 2026 regarding critical materials and metals, in your opinion, what would that be?

Justin Tolman: This is very topical because it's been a rough couple of weeks in metals and mining, and this isn't a new lesson, but I find that life is very generous with me. It keeps giving me the same lesson over and over again till I learn it. And you can sum it up by saying you can have long-term scarcity in a product, but that's not a shield against short-term volatility. It's true in mining. It's probably true in life. But we've seen it again in 2026. You know your commodity, your stock can have a great long-term thesis. And it can still get sharp drawdowns due to rates, energy, geopolitics, currency movements and broader market risk changes. Let's look at silver, which had a big run-up at the start of the year. And then a bit of a blow off its top. And I think it's down about 50%, year to date. If we look at it today, which sounds horrific until you step back from that volatility. And if we put it on a three-year time frame, the price is probably up 150%. And investors should be celebrating, but it just doesn't feel like it in the moment. And there's some contrarian value there too. We saw lithium do similar things. It can run up quickly, then have big 20% pullbacks very quickly. I've seen that would be a bear-market-type move. And it happens over a few weeks. We saw that in January and February for lithium carbonate prices. But then you step back again and realize the price is actually up 30%-35% year to date. I guess what I'd say is it's important not to confuse volatility with a true change in fundamentals. I get some of my best opportunities when the market extrapolates a few weeks of pain into a permanent impairment, and the reverse can also be true. You don't believe you're a genius when things skyrocket up again, because suddenly people care.

Thalia Hayden: Good insights. Investors are now looking forward to the second half of 2026. What key indicators will you be closely watching?

Justin Tolman: I think it's important in the back half of this year that we pay attention to the interplay between cost inflation and physical market tightness. We're likely to see the year's highest costs as Q2 results start to come through. There's obviously been an impact on energy and some consumables due to the Middle East conflicts and their fallout, but we have to balance that against genuine market tightness. Take copper, for example: it's very common, cyclically, to see producers not able to meet guidance. Not all of them and not all at once, but it impacts supply. And we've seen material supply go offline at key times. Look at Kamoa-Kakula [Copper Mine], El Teniente and Grasberg. It takes that out of the market, and it can really exacerbate very tight concentrate markets, puts pressure on existing deficits, and balances that against the tightness. We could see a real balance or tension start to emerge between higher costs and higher incentive prices. It means that existing assets that can do what they say they'll do and meet their commitments are likely to become even more valuable. They're already in the space, new supply becomes slower to bring online unless there's a good incentive price for it. And companies that can navigate that should be rewarded.

Thalia Hayden: Great perspective, Justin. I think we all learned a lot. Thanks so much for joining us and we appreciate your timely insights today.

Justin Tolman: You're most welcome. Thank you, Thalia.