Resource World Magazine

a u g u s t / s e p t e m b e r 2 0 1 5 www.resourceworld.com 5 e d i t o r ' s c o m m e n t s E l l s w o r t h D i c k s o n ellsworth Dickson, Editor-in-Chief email: editor@resourceworld.com t: 604 484 3800 | 1 877 484 3800 • Regular scheduled flights to BC's mineral resource region, including Dease Lake and Bob Quinn • Daily direct flights to Vancouver, Kelowna, Prince George and others • Multiple airport-based helicopter and fixed wing charter operations Your Way Up www.smithers.ca/airport Access to the Northwest made easy Just when thinGs were starting to look better for the belea- guered mining sector, a series of bad news events has knocked the stuffing out of the TSX Venture Exchange. While, many min- ing juniors continued to be moribund, the best of the best junior mining stocks were in their own little bull market. Then in July, a series of events unfolded that shook the confidence of already skittish investors – Greece's huge and problematic debt, the 38% drop on Chinese stock exchanges, a stomach-churning drop in the price of gold on July 20 and further price drops in already weak other commodities. Greece's new financing arrangements were viewed as negative for gold while the massive drops on the Chinese stock exchanges were viewed as bearish for industrial metals such as copper, nickel, lean, zinc, iron ore and oil. There is now concern that Chinese demand for these industrial metals will fall with their not-as-hot economy. There has been much speculation as to why the gold price dropped so much in one day. According to the World Gold Council (WGC), sell orders in the US (COMEX) and the Shanghai Gold Exchange triggered the price fall. However, the WGC views this as a temporary incident that is "not representative of the broader supply and demand dynamics." On the other hand, the dramatic price drop in gold has resulted in a flurry of retail buying of physical gold. Up to July 23, the US Mint had sold 110,000 Gold Eagle one-ounce coins for that month, according to Reuters, compared to only 21,500 in May. Jewelers in China and India have also been recent heavy buyers of gold. But retail gold and gold jewelry buyers are not enough to kick-start the gold mining sector. According to investment adviser, Arkadiusz Siero, gold prices are not driven significantly by consumer demand, but by investment demand. The bottom line appears to be the mass psychology of nega- tive market sentiment impacting miners on the TSX and the TSX Venture Exchange – even for companies with great fundamentals. It's obvious that despite the shaky global trade scenario the world will continue to need mineral commodities, especially expanding Asian economies. Overriding the recent bearish resource sector there is one thing that investors hate – uncertainty. Why would one invest in any- thing if the market is so bearish for mining stocks and commodity prices? The answer is simple – buy low and sell high. At the Sprott Stansberry Vancouver Natural Resource Symposium, I asked Rick Rule, Chairman/Founder of Sprott Global Resource Investments Ltd.: is the recent pullback in com- modities and mining shares a buying opportunity? He replied, "That depends on what you are buying and your time frame. For industrial commodities such as coal, iron, ore, oil and gas, and base metals, I think the market has further to fall. There doesn't seem to be any global growth; hence, any demand anywhere. While precious metals could go lower, the greater probability is that they will break out higher." Rule added, "We have not seen junior market capitulation but we may not need to. We have a market now where the junior stock index is off 87% in nominal terms and 90-95% in real terms. It might be that things are now simply cheap enough. Right now, Sprott is buying – not selling." When Robert Friedland, Executive Chairman of Ivanhoe Mines, spoke to the audience, he said he expects the price of zinc to rise with its increasing use in agriculture, particularly in India and Africa. n Commodities and miners drop – a buying opportunity?

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