By Brent Cook
Exploration Insights
As we all know, for most speculators and investors the past few years in the mining and exploration sector have been disastrous. However, there are a number of fundamental trends that have been set in motion over the past few years that follow upon the previous decade long bull market that point to an improving investment climate for the junior miners. We will deal with that below and lay out some useful rules of thumb for interested investors; but first, let’s briefly consider where we are today.
With inflation expectations low and metal prices apparently contained, I don’t see a pending catalyst to pop metal prices or entice the crowd into our antiquated sector. Further, given the mining sector’s very poor returns to investors who bought into the commodity boom and currency debasement story, it is difficult to see them stepping back in again. Where the next big slug of new money for mining and exploration will come from is not apparent.
Barring a significant rise in metal prices, the larger mining companies will continue to cut wherever they can. This means: people, projects, exploration, and development. Most will also be forced to lower production costs via high grading — a process that ultimately guts a deposit, rendering rock previously classified as ore, as waste.