Mining sector ready to party, analyst says
More gains to come: Overseas demand 'will ensure growth'
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Font: * * * * Paul Luke, The Province
Published: Tuesday, January 24, 2006
The world's resource industry is throwing a party that's just warming up, metal stocks watcher Lawrence Roulston says.
Resource stocks are in the grip of an exuberance that can be a sign markets are poised to turn, Roulston told the Vancouver Resource Investment Conference yesterday.
But gold and base-metal issues will remain strong enough to justify selective exuberance among investors, said Roulston, publisher of Resource Opportunities monthly newsletter.
"There's no question that the easy money has been made in the resource industry but I firmly believe the party is really just getting started," Roulston said.
"Along the way, there's going to be enormous volatility."
Economic growth in China, India, Russia and Latin America will ensure demand stays robust "well into the future," Roulston said.
During the years of low metal prices, global industry did little to develop new mines, he said.
The result is so few sources of supply are coming onstream that the world's mining industry has barely offset the depletion of its existing mines, he said.
"Metal prices are going to remain high, not necessarily at the level that they are now, but they're certainly going to remain well above long-term trend lines until enough new capacity is brought into production by the mining industry to bring supply and demand back into balance," he said.
It will take several years to develop, permit, finance and launch major new base-metal mines, he said.
It's a similar story for precious metals. China's economic growth and the oil-fed wealth of the Middle East is stroking demand for gold jewelry and bullion, Roulston said.
Yet most production gains are from mergers, expansions at existing operations and small mines rather than major new sources.
Investors should target junior companies staffed by people with credentials, credibility and "a kick-ass attitude" that reflects a hunger for success, he said.
Bob Bishop, who publishes the monthly Gold Mining Stock Report, said political and social risks around the world mean the list of countries with exploration potential is shrinking.
"There's an increasing number of places off-limit," he said. "That's very supportive of this commodities cycle."
Money manager Adrian Day told the conference he's bullish on natural-gas stocks and gold.
The world is not replacing natural-gas reserves, while gold supply is static despite rising demand, Day said. Investors should hang on to a core position in these resources. Profit-taking is fine but short-term rallies or declines should not tempt investors to cash out, he said.
"Doing nothing is sometimes much more difficult for investors than actually trading," he said.
pluke@png.canwest.com |
