The Outlook for Mining

by Lawrence Roulston. June 17, 2009

There is perhaps no better place from which to contemplate the outlook for the mining industry than a hotel room overlooking the bustling Hong Kong harbor.

Mining has become an important topic in this Asian financial center. Mines and Money, which has long been an important event for the mining world in London, is now conducting its second annual gathering here in Hong Kong. The event is well attended by investors and investment advisers from Hong Kong and throughout Asia.

Interest in the mining industry continues to wane in the Western world. At the same time, Asia is becoming keenly interested in the industry that supplies the raw materials that are critical building blocks for emerging economies. At last count, 23 of the 100 largest mining companies in the world are Chinese. China's stake in the world mining industry will inevitably continue to grow, as those companies are now scouring the world in search of metal deposits at a time when investors in the Western world want little or nothing to do with resources.

A quick glimpse of the frantic level of activity in the harbor and around this city makes it vividly clear why Chinese companies have a bullish outlook for metals. The Hong Kong Stock exchange has gained 62% in the past three months. Investors in many parts of the world see the Hong Kong market as a way to access the continued strong growth in mainland China.

While General Motors works its way through bankruptcy proceedings, the company still intends to build its ninth manufacturing plant in China. GM, in a 50-50 partnership with a Shanghai-based company, sold 1.09 million vehicles in China last year. They expect that figure to reach 2 million within five years.

Property prices throughout Hong Kong and China are rising sharply, erasing the losses of the past year. Rival developers are in bidding wars to gain access to development sites. Residential and commercial building sites are changing hands at values equivalent to hundreds of millions of dollars. Shanghai and Beijing have both joined the list of the 50 most expensive cities in the world for retail space. Hong Kong presently sits in the number three position, behind only New York and Paris.

Other tidbits from today’s South China Morning Post:

Beijing Capital international Airport handled 5.24 million passengers in May, up 16% from a year earlier, in spite of a drop in international travelers.
South Korea recorded the biggest monthly rise ever in their foreign exchange reserves last month, which now stand at $227 billion.
The Shanghai Composite Index is now at the highest level in 10 months. Money keeps pouring into the stock market on expectations of economic recovery, according to an analyst from a big Chinese securities firm.
Industrial and Commercial Bank of China is now the world's biggest bank (based on market capitalization).

One of the speakers at the conference noted that China has gone from being a net recipient of foreign direct investment in its mining industry to being net investors abroad. Chinese mining companies are aggressively investing to acquire resource projects around the world.

The Hong Kong Stock Exchange is making a strong bid to mining companies, both local and international, to list in Hong Kong. They point out that investors here have the best perspective on the value of mining companies, as they see the need for raw materials.

Lawrence Roulston, editor of Resource Opportunities, is a geologist, with engineering and business training, and more than 20 years of hands-on experience in the resource industry. Lawrence conducts frequent property visits as part of his due diligence and has toured mining and exploration projects in many parts of the world. Lawrence is frequently quoted and interviewed in the media, including national television. He is renowned as a headline speaker at mining and investment conferences around the world. Mr. Roulston's years of hands-on experience and extensive personal contacts in the industry provide unique insights that have generated an impressive track record for Resource Opportunities.

After completing his studies at the University of British Columbia in 1975, Mr. Roulston worked as an analyst for the major mining company Cominco Ltd. He also worked in a management role for several years with a mid-sized Calgary oil group. In 1984 he became the vice-president of a group of mineral exploration companies. He was also vice-president of an investment management firm focused on the resource industry. From 1994 to 1997, he was president and CEO of a mineral exploration company. Since then, he has been a resource industry consultant and independent mining analyst. He began writing Resource Opportunities in 1998.

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