Mines & money, sex, babies and commodities
"Sex, babies and commodities" was Frank Holmes' rather lurid title to his presentation at the Mines & Money conference yesterday. The industry has been through a torrid time for the past three years. But Holmes, chief executive and chief investment officer of US Global Investors, believes there are reasons to keep the faith with commodities.
"Sex, babies and commodities" was Frank Holmes' rather lurid title to his presentation at the Mines & Money conference yesterday.
The industry has been through a torrid time for the past three years. But Holmes, chief executive and chief investment officer of US Global Investors, believes there are reasons to keep the faith with commodities. For example, India has 600 million people under 25 years old - that's twice the population of the United States. There's a baby born every three seconds.
Our picture, which shows a slide from his presentation, shows the huge amount of commodities consumed by a single American over his lifetime. Population growth alone goes a long way to sustaining the mining sector. With about 1.2 billion people hooked up through Facebook and millions more on the internet, people have greater expectations for their children and families. People want better education, cars, clean environment and so on, all of which leads to greater demand for commodities.
To the Asia Mining Club for an evening of wit and wisdom of Robert Friedland, executive chairman and founder of Ivanhoe Mines, and Holmes. They did not disappoint.
"It's quite apparent from the audience that mining is not for intelligent people," Friedland observed, noting mining stocks were undervalued. WhatsApp is valued at US$19 billion but barely makes any money, while Facebook has a larger market cap than BHP, which has been going for more than 100 years.
Mining stocks had been falling in each of the past three years, which had only happened three times in the past 30 years, said Holmes.
"We're at an interesting point in the cycle. You've been shot, killed and having an out-of-body experience," Friedland said, alluding to the industry's difficult times. "The situation is hopeless but it's not serious."
He reckoned it was going to be boring for metals for the next three years, but urbanisation would continue. The world population, currently at seven billion, is expected to grow to nine billion by 2030. So demand for commodities will grow. China now has 18 million cars; the plan is to have 60 million. And they're likely to have fuel cells, which will lead to growth in demand for platinum and palladium, which, along with copper, will all be produced at Ivanhoe's mega mines in Africa. "I urge you to stay in mining. Although it's for idiots today, in three to four years' time, everyone will look exceptionally handsome and intelligent again."
Despite the difficult times endured by the mining industry in recent years, Mines & Money Hong Kong continues to grow. Now in its seventh year, it is the largest mining event in Asia and the world's third-largest. Not bad when you consider the relatively few mining stocks that are listed here.
We've had a somewhat irritated response from a reader, who's a driver, to our suggestion yesterday that the government should introduce electronic road pricing. Our reader queried the need for that, saying it wasn't cars that caused congestion, but buses and taxis.
This was our contribution to the debate that is about to get under way following the government's decision to have the subject discussed by the Transport Advisory Committee. But the committee's standard response is to use "congestion" as a ploy to justify further road-building - "build and they will come" model. Our view was a better rail system and some form of congestion tax were needed. Further views are welcome.
