Issue link: http://resourceworld.uberflip.com/i/423464
28 www.resourceworld.com D E C E M B E R / J A N U A R Y 2 0 1 5 energy sector. Oil sands operators are high cost producers and their crude commands a lower price and therefore will also be negatively affected in the future due to the abundance of cheap shale oil. The same happened when natural gas coming from shale inundated the market and provided a cheaper alternative to the burning of despised thermal coal. The traditional and relatively easy way to invest in commodities is buying stock in companies with good projects, man- agement and financial position. Investing in resource companies has to be made by first investigating the likely future of the commodities of interest. Stock could be bought cheap at the bottom of the trough of the commodity cycle; however, companies must be carefully evaluated and only the ones with viable projects at depressed commodity prices should be considered. It is said that over $8 billion in unspent funds are waiting for a clear market bottom, meaning a recovery could be swift and profitable for resource inves- tors engaged in bottom fishing. Generally speaking, stock market movements fore- cast economic activity three to six months in advance. Viable investments can also be made in precious metals streaming and royalty companies that are favoured by investors looking for low risk investments with wealth generation potential. Other than precious metals, there are other types of commodities in which one could invest. They range from diamonds to fracking sands and aggregate, zinc to PGMs, and helium to brine and energy commodities. The minerals at supply risk list produced by the British Geological Survey can be consulted before making an investment decision. The rule of thumb when investing in commodities or resource companies is to buy the long-term trend. It would also be wise to invest during or at the start of a bull market and to reduce exposure to resource companies and commodities dur- ing a bear market. Equipment manufacturers for the min- ing and oil industry and service providers (ranging from drilling companies to water filtration, desalination, and treatment com- panies) are also winners during a surge in demand for commodities. Water is also a commodity because it is indispensable in agriculture, mining and fracking. Investing in any of these companies during periods of boom is rec- ommended as they would not present risks associated with exploration or resource producers. Also innovative technologies should be monitored and carefully evalu- ated as their applications in the natural resources sector could result in hefty profits. There is much to learn in order to become a successful investor in the natural resource sector but there is also much to be gained from getting exposure to this fasci- nating and financially rewarding sector. n