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Resource World - Dec-Jan 2015 - Vol 13 Iss 1

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D E C E M B E R / J A N U A R Y 2 0 1 5 www.resourceworld.com 7 and Vale, are increasing production, even though there's the risk of oversupply," he added. "Any marginal, high-cost producer will be out of the game right now. They're not going to find capital." Copper's problems are also tied to oversupply. "We're probably heavy on inventory right now," Malek said. "We've got a lot of above-ground ore and con- siderable amounts of metal in bonded warehouses. Ultimately, growth expecta- tions are going to be whittled down, not up." LME cash buyer copper stood at $6,784.50 per tonne on October 30 com- pared with the July average of $7,103.54/t. Higher prices are predicted for nickel, which has been buoyed by Indonesia's ban on nickel ore exports and talk that the Philippines may follow suit. LME cash buyer nickel stood at $15,300/t on October 30, which compares with $13,900/t at the start of January 2014, although down from highs of over $20,000 achieved in May. Lead and zinc are also expected to climb on supply constraints. "We like zinc a lot," Malek said. "We're expecting a significant deficit next year and the following year. Ultimately, that means above-ground inventories are going to be whittled down quite sharply. We think there will have to be some form of rationing and higher prices." TD has fore- cast zinc to average $2,513/t in Q4 of 2015, which compares with $2282/t LME cash buyer on October 29. Survival of the fitteSt As the seniors struggle, many juniors bat- tle to simply stay alive. Many companies, particularly those in the gold space, have witnessed their shares languish and their treasuries hemorrhage. Adding to the pres- sure are predictions of gold's next decline and fall, including Goldman Sachs' assess- ment that the yellow metal will sink to $1,050/oz. Speaking to Resource World, Sprott US Holdings chairman, Rick Rule, urged cau- tion on forecasts of this type and noted that Goldman had estimated $2,500-2,600/ oz when the price reached $1,800/oz a few years ago. "This is not to criticize Goldman, because I think they're smart guys," he said. "But their behaviour is indicative of that found within the mar- kets at large and is explainable with simple psychology: people are pleasure seekers and pain avoiders. Also, your experience in the immediate past shapes your percep- tion of the future." At the time of writing, it was still too early to appraise the effect on gold of US Federal Reserve's decision to end its bond-buying program, better known as quantitative easing (QE). The US dollar continues to look robust on the recovery, while the markets are waiting to digest the US's full Q3 GDP growth figures. On October 30, the Bureau of Economic Analysis at the US Department of Commerce delivered an advanced estimate of 3.5% GDP growth for the quarter. Gold fell in the wake of all these devel- opments and stood at $1,141.50/oz on November 6, while silver was down to $15.42/oz; by November 17 gold was up to As contrarians would stress, opportunity often knocks loudest in the depths of a bear mar- ket – when the price of entry is cheap and the potential rewards from a future upswing at its greatest.

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