Barry Dawes B Sc F AusIMM(CP) MSEG MSAA Head of Resources Paradigm Securities Resource Sector Outlook Investment Opportunities in The New Gold Mountain Australia China Trade & Investment Hotel Sofitel Wanda Beijing September 2013
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Global Demand For Resources Non-OECD > OECD demand Demand now accelerating Current commodity prices at lows Investment in resources never better
Non-OECD surpassing OECD
Long term commodity prices
Market Prices - Oil
Market Price - Copper
China Demand For Resources Steel industry leading growth China takes >40% of metals and energy Global supply of resources limited Australia has many resources options
China surpassing USA Steel Source: World Steel Association
China surpassing USA Source: Stockcharts
China surpassing the World! Source: Stockcharts
Market Prices - Commodities WE ARE HERE
Resources Market Wave Psychology
Market Action ASX XMM Mining Index XMM -57% from April 2011
Market Action ASX XGD Gold Index XGD -77% from April 2011
Market Action ASX XSR Small Resources Index XSR -70% from April 2011
Global Economy Robust Global equity markets near all time highs Commodity prices rising Global interest rate cycle at lows Transition from disinflation to inflation Major low-risk investment opportunity
US T Bonds Yields Bottoming Source: World Steel Association INFLATION DISINFLATION CHANGE
Resources Boom Resuming BHP says 75% more commodities needed Australian Iron Ore Industry is very positive Onshore Oil Boom underway Metals demand strong, inventories tight Precious metals in strong markets Technology metals growing rapidly Uranium production to experience major growth Fertilizers are new sector
Global Capital Flows Global bond markets peaking Capital to flow from cash and bonds to equities Capital flows also into commodities Commodity equities underweight in portfolios A$ to attract capital and remain strong
Investment Opportunities Resources shares mispriced and too low Mining industry earnings bottoming Growth in production in most sectors Australian cost structure being reduced Onshore oil sector in major long term boom Exploration resulting in important discoveries A$ to remain strong Outstanding returns expected
Wide Investment Choice Explorers, Developers and Producers >60 iron ore companies >20 Copper companies >50 gold companies >30 oil and gas companies >100 other resources companies
ASX Metals and Mining
ASX Small Resources
ASX Gold Index
A$ vs US$ Source: Thechartstore.com
Conclusions Resources Boom is far from over Cyclical lows provide low risk entry points Many new projects available to develop Portfolio investment encouraged Opportunities for 5-25% equity interests Commodities from iron ore, coal, gold, oil & more Resources Sector to provide long term growth Expect growth in earnings and dividends Merger and Acquisition activity to increase Paradigm provides opportunities and advice
The Paradigm Shift Barry Dawes