Resource World Magazine

6 www.resourceworld.com d e c e m b e r / j a n u a r y 2 0 1 6 The aim of any invesTor, particu- larly the contrarian kind, is to understand the shifting sands of a down-cycle and to think about where an upside will lie in the future. Sometimes measured in years, the waiting period after making invest- ments can be uncomfortable, especially when picks perform listlessly or slide even further. But patience is a virtue and the rewards can be both gratifying and sig- nificant for those who bought wisely and cheaply. "I have zero doubt that, five years from now, we'll look back on today and say: 'damn those were the good old days'," Chairman at Sprott US Holdings Rick Rule quipped when speaking with Resource World. BIg MAcS wITh INTereST Some investors make the mistake of dis- counting the wider macro picture by focusing solely on the minutiae of a favoured sector, company or metal. They then miss signposts for the wider eco- nomic outlook and developments in China, a country vital for almost all commodi- ties. Concerns currently revolve around the country's move towards greater con- sumerism and market independence; will the transition be smooth or will it be marked by a series of shocks? The lurches felt in Chinese equities across June into September had heightened fears that the country would face a "bumpy landing". But China's underlying strengths remain. Rates of urbanization continue to grow, feeding into the county's appe- tite for resources. And while GDP growth has retracted to around 7%, probably even less, the rate comes on top of a much larger Chinese economy compared with several years ago. "Even growing at 4%, China provides as much incremental cop- per demand, for example, compared with China growing at 14% ten years ago," head of Resource Maven and newsletter writer, Gwen Preston, told Resource World. "Those who follow China were well aware its industrial growth was slowing and that its economy was shifting. But markets and investors don't often react in a logical, step- by-step manner. They often react to things in a more momentum-orientated manner." The US economic recovery also com- prises several important macros to consider. Growth is occurring at a mid- dling rate and, at the time of writing, heated debate surrounds the possibility of a mid-December increase in US inter- est rates. This has weighed on gold's performance, which fell to US $1,106.30/oz London pm fix on November 5, down from US 1,184.25/oz on October 15. Gold often rises on measures deemed inflationary with a weakening US dollar and visa- versa on anti-inflationary measures with a strengthening greenback. It remains to be seen by how much the effect of an interest rate rise will already be "baked in" if an increase occurs. A rate rise is also important in terms of borrowing and the ability to service debt. Companies have come under closer market scrutiny because of this, with many feel- ing subsequent pressure on their share prices. For example, the share price of Glencore Plc. [GLEN-LSE] stood at 134.70 pence on September 16 and then tumbled to 68.62 pence by September 28 on mar- ket concerns surrounding its debt levels. It has since rebounded after the company outlined debt-reduction plans and then reported progress on this. The share price stood at 127.10 pence on November 4. DowNS AND uPS Mining companies continue to focus on productivity and a return to their core business, which has prompted a spate of joint-venture dissolutions, divestments and spin-offs. south32 Ltd. [S32-ASX, LSE], comprising many non-core assets of BhP Billiton Ltd. [BHP-ASX, LSE, NYSE, Resource Stock OUTLOOK 2016

• Cover