ASX INVESTMENT TALKS · 2012-10-15 · 4. Base metals to follow the global economy 5. Seeds of the coming Zinc price squeeze (well beyond 2012) 6. Speciality commodities will test
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SPEAKER: Allan Trench, mining author, and academic (UWA/Curtin)
LOCATION: Perth
DATE: October 2012
ASX INVESTMENT TALKS
DISCLAIMER: The views, opinions or recommendations of the presenters are solely their own and
do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691
and its related bodies corporate (“ASX”). Information and material presented at the seminar is for
educational purposes only and does not constitute financial product advice. Investors should obtain
independent advice from an Australian financial services licensee before making investment
decisions. No responsibility is accepted by ASX for any loss or damage arising in any way (including
due to negligence) from anyone acting or refraining from acting as a result of this information or
* Centre for Exploration Targeting (UWA, Curtin), also Consultant CRU Group
Allan Trench* & Dan Packey^
Risk & Value Framework
23 mineral markets
52 company case studies
Plus Appendices on -
Country Risk
Recent ASX IPOs
A-Z of Commodity Demand
* Centre for Exploration Targeting (UWA, Curtin), also Consultant CRU Group
^ Energy & Mineral Economics Graduate School of Business, Curtin University
Currently A Tough Equity Market for
Mineral Sector Juniors
Ten Minerals Equity Trends for 2012
1. Gold to stay in favour
2. Fewer ‘lumpier’ mineral resources IPOs
3. Strained supply infrastructure to support bulk commodities
4. Base metals to follow the global economy
5. Seeds of the coming Zinc price squeeze (well beyond 2012)
6. Speciality commodities will test investor patience
7. Mergers and acquisitions to flourish
8. ‘Greener’ uranium to gradually return to favour
9. The market is primed for discovery – cash awaits on the sidelines
10. It won’t be different this time
Source: A Trench 2012 http://www.asx.com.au/resources/investor-update-newsletter/201202-hot-commodities-in-2012.htm
Getting Beyond “It’s a stock-pickers’ market” and “Market Volatility to continue”
“Of all those expensive and uncertain projects, however, which bring bankruptcy upon the greater part of the people who engage in them, there is none perhaps more perfectly ruinous than the search after new mines”.
Adam Smith 1776 “The Wealth of Nations” p.562
Personal Perspectives on Value & Risk
“When one man alone meets the expense for a long time of a whole mine, if good fortune bestows on him a vein abundant in minerals, or in other products, he becomes very wealthy. If, on the contrary, the mine is poor and barren, in time he will lose everything that he has expended on it. But the man who, in common with others, has laid out his money on several mines in a region renowned for its wealth of metals, rarely spends it in vain, for fortune usually responds to his hopes in part”.
Agricola 1556 “De Re Metallica”
Also pictured H.M. Markowitz 1952 Author of “Portfolio
Selection” Journal of Finance
Personal Perspectives on Value & Risk
• The „win and lose‟ of the metals & mining sector
results from the interplay of value & risk factors • The mining industry knows (often all too well) the
many illusions of apparent value & risk • Industry research on value & risk (e.g. equity
analysis) can act to perpetuate the many illusions that exist
• Fundamental research on exploration value
(accretion) & risk (recognition & mitigation) needs to identify & explain the illusions – and then determine the reality.
Personal Perspectives on Value & Risk
• Demand-Side (Market) Risks
– Macro level (economic analysis)
– Micro level (specific metal consumption analysis)