Timely Global Investment in Mining Assets

As 2013 starts, the global investment community is carefully monitoring and awaiting the actions of various central bankers in U.S., Europe, and Asia. Based trends in the last five (5) years resulting from the effects of the “Great Recession”, continual emphasis has been placed on injection of liquidity by way of Quantitative Easing (QE) or “digital money printing”. While trying the preclude and avoid a deflationary scenario as in the 1930s, effective deleveraging and liquidation has not occurred of the “toxic paper” such as OTC derivatives, Credit Default Swaps, and Collateralized Debt Obligations (CDOs). Central banks coupled with finance ministries and banks/financial institutions may have, in the short-term, shored-up their balance sheets via QE while maintaining fiscal cashflow(s) from domestic and international bonds sales.

While ongoing debate continues regarding fiscal policy, monetary policy and banking policy, debt and deficits continue to plague policymakers and stakeholders in various developed and developing countries as well as emerging markets. Meanwhile, commercial market demand continues to experience “stagflation” coupled with political-social-economic uncertainty while various asset classes may be at risk of near-term, short-term and long-term depreciation.

Simultaneously and independently, the global investment community is focused on a highly conservative and risk mitigated strategy and plan to literally “hedge” and preserve the value of their existing and future wealth. Thus, there is a growing emphasis on targeting investment in mining assets covering precious metals and base metals. This includes, but not limited to, gold, silver, copper, and platinum. In addition, rare earths are also receiving much attention. There is also an upside for precious metals such as gold and silver, typically treated as commodities, which are likely to take-on the role of “currencies” as potential currency debasement occurs due to the inflationary efforts of QE. There are already early discussions of a potential indexation of basket of currencies or a single global currency to gold; in other words a “return to gold standard”.

In the next 2-3 decades, prudent and savvy investors seek higher current income, higher EBITDA and net profit margins, positive waterfall cashflow(s) as well as long-term capital appreciation. In addition, beyond return on investment (ROI), there is focus on return of capital. Along these lines, mining assets and related projects targeting precious metals and base metals can provide the global investment community with a safer destination for preserving their existing and future wealth while enabling safer returns and a definitive exit.