Bullish outlook for mining

Five lean years characterised
by massive cost cutting are
finally showing some sign of
easing up, allowing for a bullish
approach to mining in 2017.
According to Charl Malan,
portfolio manager and senior
analyst at Van Eck, demand is
improving and sentiments are
far more positive.
“On the supply side it is
getting tighter because of an
increase in enforcement of
regulations and also because
of the closing of non-profitable
assets or the capex cutbacks
that have continued.”
In terms of commodities
to look out for in the coming
year, Malan said he was most
positive about copper.
Caroline Donally, a director
at Denham Capital, a private
equity fund, said as long-term
investors it was very hard to be
bearish. “We are buying assets
to hold them. We are not mad
about precious metals and
steering away from them. We
are very bearish about the base
metals such as zinc.”
Donally said while the
overall outlook for the next few
years was far more bullish than
bearish, there were risks and
uncertainties in the industry
that made it imperative to look
at commodities individually.
According to Joanne
Warner, head of global
resources at Colonial
First State Global Asset
Management, it is becoming
increasingly difficult to predict
commodity prices.
“In the past year we have
seen supply and demand
factors that have been
somewhat unusual. On the
demand side we saw stimulus
within China that led to a
higher iron ore price that no
one was forecasting. “
She said external
government policies and other
factors continued to impact.
Concern over US President
Donald Trump’s proposed
border tax for instance was
raised as one example.
“If this proposal is
accepted it will have
profound implications for the
commodities market,” said
Robert Ryan, vice president
at BCA Research. “Increasing
taxes on imports by as much as
20% will mean anything facing
that tax will see a 20% price
increase. The programme will
also see exports subsidised so
commodity exporters from the
US will have a major advantage
in moving their product into
the global market.”
He said expectations were
that the dollar cost would
be increased which would
ultimately drive down demand.
“This does make us slightly
more bearish in our approach,”
he said.
CAPTION
Bulls and bears … a panel discussion at the Investing in Africa Mining Indaba in Cape Town last
week included Neil Gregson of JP Morgan; Charl Malan, senior analyst at Van Eck; Caroline Donally
of Denham Capital; Joanne Warner, head of global resources at Colonial First State Global Asset
Management; and Robert Ryan of BCA Research. Photograph by Halden Krog