Issue link: http://resourceworld.uberflip.com/i/99312
In 2012 the dip came, saw, but mercifully did not conquer. Nonetheless, it was still a grim year, particularly for the junior mining sector, which witnessed frozen investment flows and intense share price pressure. With belts tightened, companies had to be extremely discerning in their exploratory efforts. Even the Toronto Venture Exchange's top 100 companies were battered; their equity financing dropped 41% to $1.6 billion over 2012, according to a PricewaterhouseCoopers review on November 5. But thankfully, signs of relief are starting to show. Indeed, the longerterm outlook is brighter and will be supported by the need to replace ageing operations and to meet growing demand spurred by global demographics and urbanization. That said, the European sovereign debt crisis remains unresolved and, like a bird of ill-omen, casts a baleful influence on the markets. INDUSTRIAL METALS The health of industrial metals (base metals and ferrous metals) depends on China. There was some concern in 2012 as China's growth rates dipped, consigning the boom days of 10-12% per year growth to the past. For example, Q3 2012 growth stood at 7.4%. However, supportive signs for 2013 are becoming increasingly apparent. At the end of October, the Economist reported that Chinese infrastructure investment had grown 12.6% over the first nine months of 2012 compared with the corresponding period in 2011. On November 1, Bloomberg also reported a rise in the Chinese purchasing manager's index, while several other indices show that China's manufacturing levels improved towards the end of Q3 2012. Political considerations are also at play as a new administration takes over the reins of power. "The idea circulating the market is that there's always a concerted effort to boost economic performance when there's a changeover in Chinese power," VP for business development at Alderon Iron Ore [ADV-TSX], Simon Marcotte, told Resource World. "With our ties to Hebei Iron and Steel Group, we've got a good eye for what's happening in China. The coming six months might surprise a lot of people regarding the strength of Chinese demand." On iron ore prices, Marcotte was confident. "Iron ore has rebounded quite nicely; we're back at US $120/t at end-October, which is pretty good considering they'd sunk to $86 by early September," he said. The bullish outlook was reflected by a leading London-based analyst who wished to remain anonymous. "If the anticipated Chinese economic stimulus emerges, then I think it's conceivable to see iron ore [62% Fe] trending at US $130-140/t next year," he told Resource World. But he also voiced caution. "If the Chinese government fails to spend at the same level as in recent years, then there doesn't seem much support for prices above US $110/t. There are still so many cracks in the Chinese economy – black-market lending, steel refinancing, etc. – that there could be a serious rebalancing," he said. Away from China, the European doldrums still invite concern. Spain, its economic woes and the European Central Bank's bond-buying plans are all under the microscope. As is Germany's willingness to back or pull away from any potential rescue deals. Meanwhile, the US's fiscal stimulus measures enacted in the past year, including the much-debated third round of quantitative easing (QE3), will start to DECEMBER 2012/JANUARY 2013 www.resourceworld.com 9