Not all in mining glitters
May 12, 2006 | 12:00am
Those who have mining stocks, both in the local and global front, must surely be relishing their eye-popping gains in recent months. The value of gold hit close to $600 an ounce last April, while gold futures soared and actually pierced the $600 an ounce resistance level. With increasing demand for the precious metal, market analysts are daringly talking about hitting fresh new highs of about $800 before the end of the year.
Indeed the mining bubble just seems to be growing and growing as it continues to track rising oil prices. As a hedge against the steady rise in crude oil levels and the expected resulting inflation, investment funds are plowing more funds into mining stocks.
At this stage, it seems history is repeating itself. Remember in the 1970s when the first major global oil crisis also resulted in the resurgence of the mining industry? This boom cycle lasted quite a while. Thus, according to market analysts, if things carry well, we can expect mining’s current stellar performance to carry on for a decade, even for 25 years.
After all, aside from oil prices, the growing demand of emerging economic giants such as China and India, and the relatively stable economies of superpowers Japan and the United States are also other factors driving up current metal prices.
In the resurgent Philippine mining industry, the rise in prices of precious metals is encouraging both local and foreign mining companies with existing mining rights to be more aggressive in pursuing exploration and production programs. Never mind that the noisy anti-mining advocates are making their presence felt again: investors are just too enamored with the glow of precious metals.
So can you blame the Philippines’ Chamber of Mines president Benjamin Philip Romualdez for downplaying the potential impact of anti-mining campaigns and dismissing their rhetorical issues? The chamber claims that committed investment inflows into the local mining industry totaled $525 million in the first quarter alone, and will definitely increase during the year.
Some of the mining companies that have announced new or additional investments include Sumitomo Metal Mining Co., Ltd. (SMMC), one of the world’s biggest nickel producers and refiners with a 54-percent stake in the Coral Bay Nickel Corp.’s nickel and refinery processing project in Rio Tuba, Palawan. It will spend $280 million more this year to expand its existing facilities including a high-pressure acid leaching plant that processes low-grade oxides and produces nickel/cobalt mixed sulfide, an intermediary product of nickel refining.
Atlas Consolidated Mining Corp. has also completed its $120-million financial requirements, and will raise an additional $50 million this year to restart the development of its copper mines in Toledo, Cebu.
Canadian mining company TVI Canadian mining firm TVI Pacific Inc., which is listed in the Toronto Stock Exchange, has earmarked $15 million this year to expand its mining activities in the Canatuan orebody in Zamboanga del Norte in Mindanao.
Indophil Resources, which is now undertaking exploration work at the Tampakan Mines in South Cotabato with local mining firm Sagittarius Mines, expects one of its partners, Australia-based Xstrata Mining Co., to exercise its option to invest $52 million into the Tampakan mining property and acquire a 60-percent stake in the company by July.
With the heady feeling of gold, copper, nickel and other precious metals’ prices going through the roof, it is easy for stock market investors to disregard the fundamentals.
What usually happens is that, with more money going in, a speculative frenzy is created and share prices tend to go up to record levels regardless of how sound (or unsound) the stock is. When things return to normal, many foolish speculators get stock with certificates priced below the value they acquired.
Smart investors don’t get lost in the haze and are able to make sense of all the commotion going on. But they are few in number. The less smart investors become too greedy for their own good, often getting caught off-guard and failing to see the bubble for what it really is – something that can eventually burst.
As a prudent reminder to those who wish to ride the tiger, it would be good to check all possible angles and establish indicators that would determine if mining stocks being bet on really possess the requisite fundamentals. In other words, make sure that the gold you’re buying is worth every peso that you paid for it.
Be very cautious with mining stocks that are speculative, most of which are not yet supported by any actual production yet, being still in the exploration stage, and at best possessing only a potential for actually hitting a good high-grade ore.
Mining firms with a track record of having been in the business for some time, and have actually processed gold and copper ore and exported these, are of course better bets compared to new mining companies that have simply just cashed in on the Supreme Court’s affirmation of the constitutionality of the Philippine Mining Act of 1995.
It’s a good thing that the Philippine Stock Exchange (PSE) is carefully weighing and evaluating the request of new mining concerns to lift the three-year rule on profitability before these companies could be listed and start raising capital through an initial public offering.
While PSE and other government regulatory agencies may be doing their best to ensure the safety of the investing public, it is still more prudent for prospective investor to be personally informed of what is being offered, and in the process avoid speculative buying of stocks. While we welcome the return of this latest round of robust metal prices, what we don’t need is a repeat of all those investors that got "burned" by buying worthless stocks.
"Breaking Barriers" on IBC-TV13 (11 p.m. every Wednesday) will feature on Wednesday, 17th May 2006, Ed Sutherland, Project Director of Pearl-2, a development assistance project funded by the Canadian government. Join us break barriers with the Ed Sutherland and gain better understanding of the concerns and issues related to this and other similar projects. Watch it.
Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at
Indeed the mining bubble just seems to be growing and growing as it continues to track rising oil prices. As a hedge against the steady rise in crude oil levels and the expected resulting inflation, investment funds are plowing more funds into mining stocks.
At this stage, it seems history is repeating itself. Remember in the 1970s when the first major global oil crisis also resulted in the resurgence of the mining industry? This boom cycle lasted quite a while. Thus, according to market analysts, if things carry well, we can expect mining’s current stellar performance to carry on for a decade, even for 25 years.
After all, aside from oil prices, the growing demand of emerging economic giants such as China and India, and the relatively stable economies of superpowers Japan and the United States are also other factors driving up current metal prices.
So can you blame the Philippines’ Chamber of Mines president Benjamin Philip Romualdez for downplaying the potential impact of anti-mining campaigns and dismissing their rhetorical issues? The chamber claims that committed investment inflows into the local mining industry totaled $525 million in the first quarter alone, and will definitely increase during the year.
Some of the mining companies that have announced new or additional investments include Sumitomo Metal Mining Co., Ltd. (SMMC), one of the world’s biggest nickel producers and refiners with a 54-percent stake in the Coral Bay Nickel Corp.’s nickel and refinery processing project in Rio Tuba, Palawan. It will spend $280 million more this year to expand its existing facilities including a high-pressure acid leaching plant that processes low-grade oxides and produces nickel/cobalt mixed sulfide, an intermediary product of nickel refining.
Atlas Consolidated Mining Corp. has also completed its $120-million financial requirements, and will raise an additional $50 million this year to restart the development of its copper mines in Toledo, Cebu.
Canadian mining company TVI Canadian mining firm TVI Pacific Inc., which is listed in the Toronto Stock Exchange, has earmarked $15 million this year to expand its mining activities in the Canatuan orebody in Zamboanga del Norte in Mindanao.
Indophil Resources, which is now undertaking exploration work at the Tampakan Mines in South Cotabato with local mining firm Sagittarius Mines, expects one of its partners, Australia-based Xstrata Mining Co., to exercise its option to invest $52 million into the Tampakan mining property and acquire a 60-percent stake in the company by July.
What usually happens is that, with more money going in, a speculative frenzy is created and share prices tend to go up to record levels regardless of how sound (or unsound) the stock is. When things return to normal, many foolish speculators get stock with certificates priced below the value they acquired.
Smart investors don’t get lost in the haze and are able to make sense of all the commotion going on. But they are few in number. The less smart investors become too greedy for their own good, often getting caught off-guard and failing to see the bubble for what it really is – something that can eventually burst.
As a prudent reminder to those who wish to ride the tiger, it would be good to check all possible angles and establish indicators that would determine if mining stocks being bet on really possess the requisite fundamentals. In other words, make sure that the gold you’re buying is worth every peso that you paid for it.
Be very cautious with mining stocks that are speculative, most of which are not yet supported by any actual production yet, being still in the exploration stage, and at best possessing only a potential for actually hitting a good high-grade ore.
Mining firms with a track record of having been in the business for some time, and have actually processed gold and copper ore and exported these, are of course better bets compared to new mining companies that have simply just cashed in on the Supreme Court’s affirmation of the constitutionality of the Philippine Mining Act of 1995.
It’s a good thing that the Philippine Stock Exchange (PSE) is carefully weighing and evaluating the request of new mining concerns to lift the three-year rule on profitability before these companies could be listed and start raising capital through an initial public offering.
While PSE and other government regulatory agencies may be doing their best to ensure the safety of the investing public, it is still more prudent for prospective investor to be personally informed of what is being offered, and in the process avoid speculative buying of stocks. While we welcome the return of this latest round of robust metal prices, what we don’t need is a repeat of all those investors that got "burned" by buying worthless stocks.
Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at
BrandSpace Articles
<
>
