Metals and Minerals Investment Sector

There is always a sector among the raw materials on the verge of a period of “euphoria“. On the chart below, each resource is represented by a company, because the indexes do not exist for all of the individual resources. Notice that, for 10 years, there is always a sector that is in a phase of “boom“, apart from the systemic crisis of 2008-2009. But then, all raw materials experienced a strong upward phase after the crisis.

Booms and busts in the natural resource sector since 2000.

Gold and silver have demonstrated for 10 years they are not barbarous relics and they still offer excellent protection against inflation. However, platinum and palladium are often forgotten in the family of precious metals. It is wrong to overlook these metals. Platinum and palladium have many industrial uses, reserves are limited and geographically concentrated.

Industrial metals like copper, zinc and iron, also remain under the radar of many investors. However, these three metals have had excellent price appreciation over the past 10 years. Today, all deposits of iron, zinc, and copper that are close to production or in production are potential candidates to takeover bids and participation buy-ins by Chinese, Japanese, and Korean companies or large industrial groups wishing to secure their supply. Vertical integration is no longer limited to just large groups, wholesalers are also in acquisition mode.

Another growing natural resources sector is agriculture. Agriculture is an essential sector due to the loss of agricultural land, global warming, rising energy costs and increasing world population. It is no coincidence that hundreds of thousands of hectares of farmland are being purchased by China in Africa, Korea, the countries of Middle East, from large industrial or agro food. Potash, a required element in the manufacture of fertilizers, peaked in 2008 and saw a second “rush” in 2010 when BHP Billiton Ltd. (Stock Profile – NYSE:BHP & ASX:BHP) made an unsuccessful takeover bid of Potash Corp. (Stock Profile – NYSE:POT & TSX:POT).

Another investment opportunity that often remains in the shadows is the diamond. There is no call, putt, or good financial product that’s connected to the price of diamonds. Yet in India, China and across Asia in general the diamond is experiencing double digit growth. BHP Billiton, the world’s largest diamond miner, announced its intent to leave the industry late last year, not because of a lack of opportunity but because of the difficulties associated with finding new world class mine. And last week Australian mining giant Rio Tinto Ltd. (Stock Profile – NYSE:RIO & ASX:RIO) announced its interest in selling their diamonds business to focus on their core areas. Rio Tinto is the world’s third largest producer of diamonds.

Finally, in Asia and the United States there is a growing recognition that the mining sector is a strategic and vital part of the economy. Metals and minerals like lithium, cobalt, niobium, rhodium and molybdenum are gaining international importance.

By Dr. Thomas Chaize. Dr. Chaize is the author of the Mining and Energy Newsletter. The information provided herein has been provided to by the author and, as such, is subject to our disclaimer: CLICK HERE.

Dr. Thomas Chaize

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