Stocks in companies that mine gold and other commodities are currently down; and nobody is suffering more than B.C.'s large cohort of junior mineral exploration companies. But the world is changing, and the market will change with it.
Gold stocks are in the dumper these days – although, paradoxically, gold prices aren’t – and so the promoters and other denizens of Howe Street are pretty gloomy. While gold is the thing most of them chase, stocks of companies in other commodities or resources, except for oil, aren’t doing so well either.
There are many theories (take your pick from a collection that includes the “coming financial apocalypse,” to investors merely sitting on their hands until they see a clear direction) as to why stock prices have de-coupled from commodity prices. But none of them really matters.
What does matter is that Vancouver’s Howe Street junior mining exploration companies live by those stock markets; they depend on the money their stocks generate to finance continued exploration that finds those metals that drive the world’s industry.
To understand this, these facts might be illuminating:
- Vancouver has the world’s largest concentration of exploration companies and mining professionals.
- A third of mining exploration companies globally are located in Vancouver.
- Fifty per cent of equity financing for the world’s exploration projects is arranged in Vancouver.
- Sixty per cent of exploration discoveries are Canadian-led.
- Canada produces more than 60 commodities and is the world leader in 17 of those.
One might say that Vancouver is heavily invested in mining exploration, particularly, in commodities. Does that mean those exploration companies should just fold up their tents and give up? Should we all abandon hope and hide under our beds? No, say most analysts. We should take a longer-term view.
The world is in a state of flux right now, with old powers like the U.S. and Europe losing their places at the top of the heap because of high debt levels, and countries like China and India rising. When countries expand, commodities are needed and their stocks do well. So, while it looks grim in North America and Europe, it looks pretty good in Asia.
This means a buying opportunity is opening for those brave enough to take advantage of it, says Joe Martin, founder and chair of Cambridge House International, which puts on investment conferences all over North America (the next one is the World Investment Conference to be held in Vancouver June 3 and 4).
“Demand for commodities is real,” he explains. “The world needs commodities and it’s the job of the Canadian junior companies to find them. Markets bottom; they go up.”