I was able to connect with the legendary Don Coxe this week, chairman ofCoxe Advisors LLP, during a time in which investor sentiment in the mining and precious metals sector has reached levels of “despair and cynicism”,the likes of which Don has never seen before.
What was encouraging to note however, was that in response to investor sentiment, large mining companies are cutting projects and plans to build new mines—which according to Don, will extend and further heighten the next up-cycle, as well as create shortages in the metals later this decade.
Reflecting on the recent BMO Metals & Mining conference, Don explained that, “The new CEO of Barrick…promised that after they complete their last big project, which will be done in two years—they’re not going to be developing any new mines for a long time. You never once heard that kind of statement being made at a conference from 2003 to 2012…looking further out (because the commodity boom is still intact), we won’t be getting a new generation of mines being brought in 3-4 years from now. So the next shortages will probably develop later in this decade.”
Don further added that, “I have not seen such despair and cynicism like this before…I’ve been going to conferences for so long, and [in the past] there would be doubt expressed. But not the kind of throwing in of the towel which permeated this conference…[However], the old saying is that it’s always darkest just before the dawn…We have is pessimism now, [but] optimism will return. Optimism can be retained for a whole decade…therefore, the pullback that we’ve had is something I would regard as temporary, as painful as it is…This is the stuff of the next big bull market, but what you don’t know, is what the gestation period is.” ...