Issue link: http://resourceworld.uberflip.com/i/229125
neutral sectors as well as US healthcare, as this is what Phase II of the business cycle usually favours. Let's focus on energy for a moment as that is the specific area in the resource sector Martin favours the most. Specifically, he favours the exploration and production (E&P) companies and the energy services companies. Roberge believes Canadian energy producers should eventually benefit from the breakdown in correlation between oil prices and the loonie. Indeed, all else equal, strong global economic growth is bad for bonds and the C$ (due to foreign bond outflows), but positive for oil prices. In other words, the same forces weakening the C$ are strengthening oil prices. Accordingly, if we assume that over the next two years: 1) WTI trades between US $100-110/bbl, 2) the C$ falls to 90 cents, and 3) differentials (the price difference between WCS and WTI) return to their historical average of $17, thanks to increased refining and heavy oil transportation capacity, Western Canadian Select (WCS) could easily reach $100/bbl. Obviously, the valuation of Canadian E&Ps does not discount this scenario. Quite to the contrary, still-wide differentials are keeping valuation depressed. In fact, for the first time since 1998-99 (when the barrel oil plunged to $10/bbl) and the 2008-09 financial crisis, Canadian E&Ps are trading at more than a 20% discount to US E&Ps on a Price/ Book Value basis and near a 50% discount to pipelines. Bottom line, we believe $100 WCS price by 2015 will take many portfolio managers off guard as they are totally underweight in Canadian energy. In conclusion, while we do acknowledge the severe downturn in the mining sector, our preferred sector in mining would be base metals as it correlates to the economic recovery. While it has been difficult to benefit from investing in the mining sector, we still find having some exposure to the sector is prudent. Please stick to the highest of quality mining companies with strong balance sheets and quality management teams. Dennis Hoesgen and Eric Hoesgen are Senior Investment Advisors with Hoesgen TSXV: ORX Investment Partners (HIP) at Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp., Member of Canadian Investor Protection Fund. The information contained in this article is drawn from sources believed to be reliable, but the accuracy and completeness is not guaranteed, nor in providing it does HIP, Canaccord Genuity Corp., or its subsidiaries, or affiliated companies, assume any liability. This information is current as of the date appearing in this article, and we do not assume any obligation to update the information or advise on further developments relating to these securities. This report should not be considered personal investment advice or a solicitation to buy or sell securities. Canaccord Genuity and holdings of its respective directors, officers and employees and their associations, from time to time may buy or sell any securities mentioned herein. The views expressed are those of the authors and not necessarily those of Canaccord. Eric Hoesgen and Dennis Hoesgen can be reached at 604-643-7705 or at HIP@Canaccord.com n orefinders.ca +1 250 707 0911 Exploring Canada's Richest Gold Districts Kirkland Lake and Red Lake, Ontario •Mirado,KirklandLakeNI43-101mineralresource estimatecompletedin2013 Fully financ ed •PositivemetallurgicaltestworkatMiradoreporting upto95%goldrecovery •Miradoenvironmentalbaselinestudyunderway DECEMBER/JANUARY 2014 RW December 2013.indd 27 www.resourceworld.com 27 12/11/2013 6:12 PM