Best strategies and practices when investing into the Mining Industry
Published: 14 December 2016 03:32
Experienced investors and mining professionals Marc Blais and George McIssac provide their views on what investors need to be looking out for going into 2017, and what fundamentals they need to understand before making investment into the mining sector
Interest rates, the coming inflation and the political and the economical perspectives for precious metals are excellent for 2017 and following. The very low interest economical uncertainty around the world are all helping the current trend for gold and silver.
The way the central banks have been trying to fix the weakness of the banking system (for example, by printing a lot of paper money) is helping gold and silver prices. Investors have now lost confidence in the central banks… So they look for certainty in a very uncertain world!
After 3QEs in United States and many similar efforts in Europe, Japan and China, the banking system is still extremely fragile according to the IMF. All the while, the global economy hasn’t recovered yet from the 2008-09 crisis, and both bond and stock markets remain volatile.
Investors should invest– and have gradually moved to – hard assets like real estate and physical gold and silver and miners.
The supply of metals from mines may start to decrease as uneconomical deposits close down while the pipeline of new projects coming on line is depleted. There is a risk that supply may not meet demand for many commodities.
Technically speaking, the investors should look for short payback periods compared to the life of the mine, and enough free cash flow to meet all financial, exploration, and investment requirements. Take the time to understand the impact of possible cost overruns during the construction phase on the economic indicators of a project.
On the financial side, mining investors should look at companies having a lot of mining experience and a good financial situation as investing at the beginning of a new mining cycle is different than investing at the end of the cycle.
At the beginning of a new cycle, it is still difficult to raise money and the metal prices are still too low to generate quick profit. So an excellent technical and financial team is necessary to generate quick results that will positively impact the market value of the stock.
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Miners & Investors is a trusted provider of analysis, and commentary that helps illuminate the most significant issues, events and trends impacting the Latin American Mining and Investment markets.
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