The 2011 Montreal Investment Conference Wraps Up
Published in November 21, 2011on
A decent venue, this, certainly an improvement over a Hilton we stayed at near Marble Arch Station in London for an IIC event a few years ago where the electronic room keys didn't stay authorized, the fire alarms went off inexplicably night after night at all hours (this was not long after 9/11), and the bars ran out of beer and scotch at 4 in the afternoon – it should not be rocket science for a hotel that a convention of mining investors might be cause for an extra cask or two. But then, that's the Brits; the Quebecois know better.
Young Chris Berry (yes, of Dr. Michael spawn) gave the most coherent presentation we've heard to-date on the matter of rare earths and critical metals. The usual scolding that North America has abandoned its supply chain to China for this block of Periodic Table entries was in order, of course, especially now that the Chinese are using most of their own stuff for internal consumption, but the sobering news from Berry is that as tiny is this sector is, there just ain't room for 300 exploration companies and many will crash and burn; many of those due to unsolved metallurgical issues on complex ore deposits. The good news for astute investors is that restoring any sort of reliable domestic (North America and Europe) supply to the makers of magnets, batteries, paints, turbines and other modern goodies is a decade out, so some plays are gonna run long and well. Demand forecasts actually have fallen for critical, as some of the bigger outfits (think Toyota) are spending gobs of R&D money on workarounds to the actual and forecast shortages, so it's a tricky market, fraught with both opportunity and plenty of chances to screw up absent solid investor due diligence. Pre-production properties are rare.
Our old friend Terry Orstland, formerly of BMO who is now one of Canada's major independent consultants and advisers on new mining projects, made one of the most astute comments we've ever heard from a podium at one of these shin-digs: “You can't move a mine.” How true – you'd better gird your loins for increasingly regressive regimes wanting to loot profits from mining companies or just stealing their production to swell the palace coffers. Bloody well right. Chile went that route and killed its copper industry and its way of life a half-century ago – another experiment in Europe-style socialism. Terry likes Colombia a lot. We agree. Projects there are being financed by production – screw the banks – just pay back your gold-mine development costs in gold. Some current resource bottlenecks involve zinc and coal, Orstland said. Evaluating a prospective mine, he uses metal prices of $1,500 gold, $2.85 copper, $16 silver and 65-cent lead. Gold in the ground is useful at between $60 and $80 for measured and indicated resources, and between $200 and $300 for honest-to-gawd reserves. We hope Terry comes back to Cambridge House, and we'll never forget that great Hecla tour in Venezuela and all those eligible bachelorettes at that dog-eared old Intercontinental on the bank of the Orinoco River.
The conference capper was a very rapid-fire round-table: What commodity do you like best? Jeff Berwick likes food, fertilizer, and energy. Dr. Mike Berry, go for the fertilizer play; Thom Calandra likes potash and vermiculite; John Kaiser, potash. As for metals: Kaiser likes silver; Calandra, moly; Berry, copper; and Berwick, silver. As for the DJIA by Christmas, up or down from now? Berwick, up; Berry, wildly up and down but basically flat; Calandra, up; Kaiser, down.
And there you have it. Au revoir from Quebec, and we'll see you in the funnies.
Article by David Bond