Mining Investment: Back to Reality or Generational Opportunity?
Mining and more specifically, investment in metals & mining can be a dirty game, both literally and figuratively. Historically, fortunes have been made by the select few and fortunes have been lost by many. The one commonality is that’s it certainly a wild ride. Being a geologist by training, I learned early in my career the bi-polar nature of working in a cyclical industry. Whether it was offshore Oil & Gas exploration in the early 2000’s or riding the Australian mining boom the past few years; a big-picture perspective and perhaps some humility have been important. A short history lesson of the boom and bust nature of commodities should remind those in the industry that the day will come when you'll look back at 2016 and think - what an opportunity!
There’s little doubt the recent global commodities boom was a direct result of China’s unprecedented appetite and growth over the past decade or so. A simple graph comparing Chinese commodity imports with the share price of BHP-B tells you everything you need to know. The real question on everyone’s mind is, what happens next? Chinese growth is now the slowest in 25 years (WSJ, 19-Jan-16) and the central government is aiming to transition from a raw material consumer with large building and infrastructure projects to a more sustained domestic consumer-based economy. Additionally, the EU is still sluggish, South America is worse and the recent global share market sell-off isn't giving anyone the warm & fuzzies. So will the next decade simply resemble a more tempered and sustainable consumption model or are we back to the days when people would say "the way to make a small fortune in mining...is to start with a big fortune".
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