Mining Stocks Have Tech-Company Margins and Wall Street Hasn't Noticed | Tavi Costa
Summary
- Silver Mining Margins: In the current environment (March 2026 context), silver is trading above $50/oz (reaching up to $120/oz recently). With production costs around $15/oz, miners are generating "tech-company margins," yet the sector remains priced for a low-price environment.
- Structural Underinvestment: Exploration budgets are at 4-year lows despite record prices. This lack of Capex guarantees a prolonged supply deficit, supporting elevated prices for the next decade.
- Latin American Renaissance: Political shifts in South America (Milei in Argentina, changes in Bolivia/Chile) are reducing jurisdiction risk. The US is forced to friend-shore critical minerals from LatAm, creating a floor for asset prices there.
- The Dollar Thesis: The DXY is at critical support and expected to break down due to US fiscal dominance (interest payments > defense). This devaluation will drive the next leg of the commodity supercycle.
- Rare Earths Skepticism: The sector is viewed as a speculative bubble with too many players chasing minerals that are not actually "rare" or economically critical at the scale of copper or zinc.
Trade Ideas
Tavi Costa
CEO of Azura Capital
Silver is trading above $50/oz, but miners have all-in sustaining costs (AISC) around $15/oz. However, the mining sector is only 1% of global equities (vs. 12% at prior peaks). The market is pricing miners as if metal prices will revert to historical lows. Because they haven't reverted, these companies are now printing free cash flow with margins comparable to Google or Nvidia. This disconnect must close via a massive repricing of the equities. Long Junior Silver and Gold Miners (SILJ/GDXJ) and high-margin operators (PAAS) to capture the "margin expansion" trade. A deflationary crash that drags down all equities, including profitable miners.
Tavi Costa
CEO of Azura Capital
While the market hypes "Rare Earths," Costa argues the real supply crunch is in "scale" metals like Copper, Zinc, and Nickel. Supply is stagnant, and discovery rates are low. The "Green Transition" and AI infrastructure build-out require massive amounts of base metals. Unlike niche minerals, these markets are deep and liquid. The lack of new mines coming online means prices must stay elevated to incentivize production, directly benefiting established producers. Long Copper and Base Metal Miners. Global recession reducing industrial demand for base metals.
Tavi Costa
CEO of Azura Capital
Costa explicitly states, "Why are we giving this such emphasis... Rare earth is not rare." He notes there are too many players focusing on a small, niche market. The sector has become a "speculative bubble" driven by narrative rather than economic geology. Most deposits are uneconomic, and the market size doesn't justify the number of companies. Capital will likely be destroyed here compared to base metals. Avoid Rare Earth miners and ETFs. A specific geopolitical ban by China could temporarily spike prices due to panic hoarding.
Tavi Costa
CEO of Azura Capital
Political risk in Latin America is shifting. Costa notes positive changes in Argentina, Bolivia, and Brazil, and emphasizes that the US government is now incentivized to support these jurisdictions for supply chain security. Investors historically applied a massive "jurisdiction discount" to LatAm assets due to fear of nationalization. As the US "friend-shores" mining supply chains, this risk premium will evaporate, causing a repricing of Brazilian and broader LatAm equities. Long Brazil (EWZ) and Latin America (ILF) as a play on resource-rich, improving jurisdictions. Reversal of political trends back toward extreme resource nationalism or socialism.
Tavi Costa
CEO of Azura Capital
The US fiscal situation (interest payments at 4-5% of GDP) forces the government to spend, regardless of Fed policy. The DXY (Dollar Index) is sitting on critical support. The only way to manage the debt burden without default is currency debasement (financial repression). A breakdown in the DXY triggers the "second leg" of the commodity and Emerging Market bull run. Short the US Dollar (via UUP or futures). A global liquidity crisis (flight to safety) which typically spikes the USD temporarily.
Up Next
This Wealthion video, published February 17, 2026, features Tavi Costa discussing SILJ, GDXJ, PAAS, COPX, FCX, VALE, REMX, MP, EWZ, ILF, UUP. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Tavi Costa · Tickers: SILJ, GDXJ, PAAS, COPX, FCX, VALE, REMX, MP, EWZ, ILF, UUP