A Fragile Peace: US and China Race Toward Tech and Resource Control

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Aside from the almighty small end barf on Tuesday this week, things started looking up again in the back half of the week.

Silver, gold (and in current times, US critical minerals) will perform better during times of global uncertainty.

Over the last two weeks the market appeared to be pricing in a potential “global new normal” post the Trump-Xi meeting.

...but what we got instead was a “12 month truce”.

A short, mutually agreed pause in economic and trade “hostilities” while the USA and China each try to urgently patch up the respective areas of weakness used against them as leverage by the other.

(silver, gold and US critical minerals stocks started to bounce back as the market digested the truce)

The US has been using tariffs and export controls on advanced technologies to exert pressure on China.

In response, China has successfully used rare earths export controls as leverage to slow, delay, or even pause these US tactics.

We recently wrote our views that the next global super power will be the country that wins the race in:

• Artificial Intelligence (AI)
• AI-driven defence
• Autonomous war robots and drones
• Quantum computing, and
• Advanced energy technologies.

To win this race the country needs:

1. To be the most technologically advanced in each area
2. To have capability to rapidly manufacture each technology at large scale, and
3. The raw materials and inputs (critical minerals) to manufacture at a large scale

Right now, the USA dominates in (1) advanced technology.

China dominates in (2) manufacturing capacity and (3) raw materials and inputs.

(how did we get here? Over the last 40 years the “globalisation” movement saw the US focus on technology, finance and being the global currency - outsourcing manufacturing, mining and processing to countries like China, which was cheaper)

We think the 12 month truce will be used by both countries to keep racing in advanced technology research and development, with China putting their focus on this part of the race where the US currently dominates.

The US (while trying to maintain their lead in advanced technology) will use the “truce time” to run as hard and fast as possible in rebuilding their domestic manufacturing capabilities and domestic supply and processing of critical minerals.

(while ALSO trying to manage their $38 trillion national debt - and during times of urgent or existential national priorities... history shows that money printing increases to make urgent things happen faster...)

Fun Fact: A key factor of the USA helping win World War 2 was that at the time, the USA was at peak “industrialisation” and domestic mining, and used its massive industrial and manufacturing capacity (at the time) to produce weapons, vehicles, and supplies on an unprecedented scale, outpacing Axis production and sustaining allies like Britain and the Soviet Union.

Not to mention winning the “advanced technology race” with the Manhattan project...

So yes, outsourcing mining and industrial manufacturing during the globalisation movement was a long term strategic “own goal” by the USA.

(which they are now trying to fix as quickly as possible)

Our take is that the intense US-China competition is not going away.

And both countries will be running faster to take (or keep) the lead in advanced technology, manufacturing and critical raw materials supply.

Or at best reduce reliance on each other to become self-sufficient.

So what will the world look like in a few years time?

Will one country be the “winner” and become (or remain) the overall global big dog?

Or will the world decouple into two regionally dominant powers?

Or something totally unexpected? A multi-polar global power balance?

No one knows - and it’s this uncertainty that should drive gold and silver higher.

(particularly because of the US dollars long time role as global currency combined with their current record national debt levels and near term urgent spending required to fund this race with China)

What DOES look certain after this week is that the race is on - which is good for US critical minerals and industrial manufacturing tech.

In the last 18 months we have positioned our Portfolio for exposure to the thesis outlined above.

(click on the stock code links below to read our Investment Memos for each stock, including risks. Repeated stock codes below indicates exposure to multiple themes)

US critical minerals:

We accelerated adding exposure over the last month, focusing on projects for critical minerals required for military and advanced technologies, located inside US borders:

SS1, RML, LKY, PNN, AW1, LSR - also now joined by PFE,

...and ION for critical minerals recycling

Silver:

In silver, we further increased exposure during September, focusing on later stage projects which already have a proven resource of silver:

SS1, MTH, WCE, RCM, AVM, IVR, JBY - also now joined by PFE.

Gold:

We have been bullish gold almost 3 years now - current positions are:

KAU, JBY, TTM, HAR, MTH, RML, AVM and explorers BPM, PUR and TG1

US manufacturing:

We also have a position for exposure in US reshoring of defence manufacturing and shipbuilding:

AL3

So is that done for the year?

We feel well positioned and ready for our high conviction themes for 2026 - gold, silver and US critical minerals (unless something really interesting comes along).

So where to next?

Winning the geopolitics game with advanced technologies dominance also comes down to a cheap and abundant energy supply - we are looking at oil & gas (which is currently unloved with a lot of bargains around, in our opinion) and also uranium.

We are always looking for undervalued stocks in tech or advanced industrial manufacturing... sort of like AL3, ONE or ROC when we first found them - with years of research, development, product in market and sales traction but trading at a relatively low market cap.

Lets not forget Europe here - with the USA currently distracted from NATO, Europe is accelerating its own self sufficiency in critical minerals, industrial manufacturing and defence - perhaps something in this theme?

We are also particularly interested in companies trying to solve and treat mental health issues - which we think is a major and highly impactful problem that urgently needs to be addressed.

If you have been deeply thinking about a particular investment thematic for a long time that you believe is ready to start playing out - let us know by replying to this email.

(doesn’t matter how obscure... we are keen to hear any ideas - in fact the more tangential the better)

AL3 site visit yesterday

We mentioned earlier that after the USA leveraged its industrial manufacturing strength (at the time) to help the allies win World War 2, that outsourcing its industrial manufacturing overseas during the last 40 years was a strategic “own goal”.

Especially in shipbuilding - where China is now the clear leader, followed by South Korea and Japan.

(if you are the best and fastest at building commercial ships, you will probably be the best and fastest at building military ships too...especially if it suddenly become “urgent”)

With the US having acknowledged this, industrial and defence manufacturing has become a US priority.

AML3D (ASX:AL3) 3D prints complex metal parts, and sells the 3D printing systems to the defence, shipbuilding and manufacturing industry.

It's an Australian company, however AL3 has secured more than A$23.5M in orders from the US market since early 2023.

We have been Invested in AL3 since June 2024.

12 months ago AL3 raised $30M at 19c to more than double the manufacturing capacity of its US facility in Ohio.

Fast forward to today, and AL3’s facility in Ohio, USA is in operation.

AL3 recently received a “Letter of Intent” from the US Navy which identified AL3 as ‘pivotal’ to its additive manufacturing needs, including:

• Up to 100 additive manufacturing systems
• Up to 400 additive manufacturing components by 2026
• Up to 1,600 additive manufacturing components by 2030

Fresh from AL3 CEO Sean Ebert’s trip to Washington where he spent some time with Australia’s Ambassador to the US Kevin Rudd... (hey, look Financial Review - another one)

(Source)

On Friday Sean hosted some of our team, other investors and analysts for a tour of AL3’s local technology facility in Adelaide.

We were shown around the facilities, and got an update on how things are progressing over in the US.

The South Australian Minister for Trade and Investment, Hon. Joe Szakacs MP was a special guest and spoke about “national security threats” being at levels “not seen in a generation”.

He also said that AL3 had a real opportunity to solve US industrial and defence manufacturing problems and that the government was “willing to back winners” (like AL3).

AL3’s CEO Sean Ebert then gave everyone a general update on AL3.

He talked about how that Letter Of Intent from the US Navy was a signal to AL3 to get ready and plan its expansions according to the demand they expect to have over the coming years.

(check out our detailed note on that LOI to AL3 from the US Navy here).

He also talked about how the US submarine industrial base was looking to move from conventional casting to Additive Manufacturing.

This is where that recent $4.5M systems sale to HII (Huntington Ingalls Industries Inc) probably fits in...

(See our Quick Take on that sale here)

HII’s Newport News Shipbuilding (NNS) division is the largest military shipbuilder in the US, known for producing aircraft carriers and submarines plus other defence technologies.

HII is the parent company, currently capped at $19BN and is one of the biggest defence contractors in the US.

With the US facility in place, and the company entering the UK and European markets now (using the same US playbook), AL3 looks set up for a big 12-24 months.

We think AL3 has the right tailwinds, now it's just about making the most of them and putting the company front and centre of the industry as the leading solution in wire additive manufacturing technology.

Photos of the 3D metal printing robots in action weren’t allowed this time... but here is a link to our previous site visit with a few shots we took:

Have a great weekend,

Next Investors