Resource World Magazine

f e b r u a r y / m a r c h 2 0 1 6 www.resourceworld.com 21 at t h e m a r k e t R o d n e y B l a k e Resource Solid I ended my last Resource World column by stating "Happy New Year...I hope." I was hoping, that after nearly five years, one of the most vicious resource bear markets that I had ever experienced would finally come to an end, and that resource prices and resource stock prices, would finally move up in 2016. To briefly recap, at the end of 2015 gold bullion was building a base above US $1,050/oz, copper had moved from a low of just above US $2.00/lb to about US $2.15, and crude oil was in a trading range of about US $35-$38/bbl. And the TSX Venture Exchange, the bellwether index for resource issues, had rebounded from a tax-loss induced record low of 496 to end the year at an encouraging level of 526. So what did my little bit of New Year's optimism give us? The first three weeks of 2016 began with several days of a Chinese stock market meltdown, news of Saudi Arabian mass executions, reports of record high crude oil inventories and, just to top things off, North Korea announced they had set off a hydrogen bomb. All of which helped pushed copper down to a seven-year low of US $1.94/lb and crude oil down to a 13-year low below US $29/bbl. Gold bullion, the safe haven metal, man- aged to move higher into the US $1,100/oz range. The TSX Venture Exchange, in a clear breakdown in investor confidence, turned turtle and quickly plunged back down to set new record lows of about 474. So is that it for the year? Is my reason for optimism shattered? Shaken perhaps, but not shattered, and here's why. The resource markets seem to be focusing on China and crude oil for their direction, and as of late, that's been down. But let's look at the big picture. The Chinese econ- omy, while consolidating of late, is still expanding and is still the largest movement of people ever to modernize. This means increased demand for all things commod- ity…over time. Crude oil is adjusting to the sudden flush of increased production brought on by a new technology – hydrau- lic fracturing of the rock – or fracking. But fracked oil is not cheap oil and the produc- ers cannot keep producing at below their cost of production. In fact, the number of active North American drill rigs is down by more than half from just one year ago. Crude oil supply should and will begin to tighten, again…over time. New bull markets are never announced and they tend to go unnoticed in the con- fusion of the current bear. We may have missed the traditional New Year's bounce, but the year is still young. If China and crude oil stabilize and the Venture Exchange begins to move higher then I still think the foundation for next resource based bull mar- ket is solid – resource solid. n Rodney Blake is an Investment Advisors with Canaccord Genuity Wealth Management, a division of Canaccord Genuity Corp, Member- Canadian Investor Protection Fund. The information contained in this article is drawn from sources believed to be reliable, but the accuracy and completeness of the informa- tion is not guaranteed, nor in providing it does Rodney Blake, Canaccord Genuity Corp, or its subsidiaries, or affiliated companies, assume any liability. This information is cur- rent as of the date appearing in this article, we do not assume any obligation to update the information or advise on further develop- ments relating to these securities. This article should not be considered personal investment advice or a solicitation to buy or sell securities. Canaccord Genuity and holdings of its respec- tive 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 author and not nec- essarily those of Canaccord Genuity Corp. He can be reached at 604-643-7567 or rod.blake@ canaccord.com Leaders in Public Company Auditing, Specialists in the Resource Sector Visit us at the PDAC Convention March 6-9, 2016 Booth 346 w w w . d a v i d s o n - c o . c o m

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