Category — Resources

Platinum has, like every metal, been in the wars.

But the travails of platinum mining companies have been even greater.

Rising costs; mines that have become cash-drains; lay-offs and labour disputes leading to violence; and, in one case, an ill-advised purchase of a copper company at the top of the market.

In short, they’re in a bad way.

But is this reflected in the price? Is it time to put on our contrarian’s hat and go looking to buy into the sector again?

Let’s have a look… [Read more →]

Back in 1992, Gina Rinehart’s wealth stood at $75 million.

By 2009, it had INCREASED 38-FOLD to $2.9 billion!

Not bad. But she had only just got started.

Today her personal wealth measures $29 billion.

Put another way, over 21 years her wealth has increased at an average growth rate of 32.8% per annum.

It’s hard to think of a sector outside of resources that can create such vast personal wealth so rapidly.

Not even the best-performing hedge fund manager in history can compete. Stan Druckenmiller was close, with average gains of 30% per annum over roughly the same time frame, but Rinehart is ahead by a nose. More to the point, the wealth is hers, not a fund’s.

My point is this: if you know how to navigate the resource sector, there’s simply no other wealth generator like it… [Read more →]

Buyers are viewing the current fall in the price of gold and silver as an opportunity to grab a bargain — not a time to panic.

Have you tried to buy some gold or silver bullion yourself?

You might find it’s not as easy as you thought. I recommend you go through one of the usual dealers to see what I mean (and get it a sensible price). Just be prepared for a wait. This note on the Ainslie Bullion site says it all:

‘We’d like to apologise to our customers at having to close our web store this afternoon. After the craziness last night we have been overwhelmed on the trading floor all day with buying at these prices. With a back log of internet orders as well we could not be confident of having stock to supply new orders and took the decision to close the website rather than sell something we couldn’t deliver. We hope to have it back up soon tonight after a stock take now trading has finished.’

As I say, I’d recommend buying from a dealer. But to see what happens when buyers and sellers meet directly on the free market, also check out eBay.com.au [Read more →]

The global mining industry is in the midst of a remarkable shift toward complete automation through technology. It has similarities with the automobile industry and the changes they went through over the last 30 years.

For example, Unmanned Aerial Vehicles (UAV’s) are now performing geological surveys and investigating safety issues at mine sites and rigs. The US Geological Survey’s head of UAV Projects Mike Hutt compared the cost effectiveness of using UAV’s rather than manned aircraft. Hutt says that,‘It may cost $2,000 an hour to rent a helicopter…our costs for sending a couple of operators out with a system [UAV's] is under $200 an hour.’

If we look deep into central Brazil, VALE SA are constructing giant conveyor belts that start at their iron ore pit and go straight to the processing plant, eliminating the need for trucks all together. The whole operation monitored by a ‘Star Trek’ control room, satellites and sensors.

It’s not so farfetched to see the whole mining ‘pit-to-port’ process being run by a few operators (with degrees in Computer Gaming) and automated systems. It really is mining of the future.

My point? There’s a major shift happening right now to be smarter and better in the operation of mines across the globe. This shift is being driven by the need to lower costs. It’s also being driven by the growing demand for resources and the difficulty of extracting them from increasingly challenging places.

But at its core, this isn’t a mining story. It’s a technology story. Once you understand how technology drives progress – and has for all of human history – unlocking new investment opportunities becomes a lot easier, and a lot more exciting! [Read more →]

I was chatting with Rick Rule last Friday. Rick is now part of Sprott Asset Management, one of the most respected natural resource investors around. Rick also had a ridiculously good long-term track record in managing money before joining Sprott.

Anyway, Rick has a new thesis he is hot on: platinum and palladium, or more broadly the platinum group metals (PGMs). I’ve learned when Rick gets hot on an idea, it is worth listening to him.

The thesis is simple, as most good ones tend to be…

The Law of Supply and Demand

‘What we discovered in about four weeks’ work,’ Rick told me, ‘is that the platinum and palladium mining industry as a whole does not earn its cost of capital. What that means is that either the price of platinum and palladium go up or there is less and less of it going forward.’

Another way to say it is that the platinum and palladium business, as is, doesn’t pay investors enough for the risks they take compared with alternatives. So it means people will not invest new dollars in the sector.

No new investment in mining means depletion of existing mines with no new sources of supply. Eventually, the price has to go up as rising demand (or flat demand) presses on a diminished supply.

What’s unique here is that platinum and palladium face particularly challenging supply constraints. [Read more →]