For 2014 Gains, Look To Uranium, PGMs and Gems

uraniumPaul Renken, senior geologist and analyst with VSA Capital, calls 2014 a soft year for gold and silver prices, but foresees stronger prices—and demand—for nickel, copper and tech metals as the year progresses. In this Mining Report interview, he lists the three commodities investors should feel good about and digs into the details of the Indonesian ban on exports of raw ore.


The Mining Report: Paul, what three predictions for 2014 does VSA Capital have for mining investors?


Paul Renken: We believe three commodities offer the best opportunities for capital or investment gains in 2014. First, several factors indicate that the uranium space will revert to the positive side. The end of Russia’s Megatons to Megawatts program will take a significant amount of material out of the spot market. And while the Japanese reactors haven’t yet come back on-line—and indeed Japan has been leaking some yellowcake, now surplus to requirements, into the market—we expect at least two reactors will be allowed to restart in 2014. Japan’s balance-of-payments deficit is getting serious, due to the need to import liquid natural gas to make up its energy demand shortfall. All of this is favorable to uranium’s spot price, which should rise to the $40/pound ($40/lb) level.


“Several factors indicate that the uranium space will revert to the positive side. . .second, we’re bullish on the PGMs.”


Second, we’re bullish on the platinum group metals (PGMs). There is a significant amount of above-ground stocks, but labor issues remain volatile in South Africa. Last year, the country’s Mines Minister had conversations with the Russian government about creating what they called a cooperative agreement, but which the commercial markets would call a cartel, to gain more control over the price and availability of PGMs. Another piece of news in the PGM space is the difficulties Colossus Minerals Inc. (CSI:TSX; COLUF:OTCQX) is having obtaining financing on its project in Brazil. That was to be a significant gold and PGM producer outside of South Africa. Today, that project no longer appears to be reasonable or even probable, due to financial difficulties. Given the improved auto-manufacturing outlook in Europe, China and elsewhere, we think PGM prices will continue to firm through the year.


“The luxury market continues to show buoyancy.”


Third, we think that gemstones, specifically the diamond space, is a good place to be this year. The luxury market continues to show buoyancy. We appreciated the comments Gem Diamonds Ltd. (GEMD:LSE; GEMD:VIRTX; ZVW:FSE) issued last month on its production figures and sales. That company is in production in Lesotho and announced that its average selling price on the stones has improved by 43% since H1/13. That indicates a lot of interest in the retail space. Any company in position to produce gemstones—diamonds in particular—will do well this year.


TMR: Looking back on 2013, which predictions in the mining space did VSA get right?


PR: I have to start by admitting that many analysts, myself included, got many things wrong as far as equities were concerned, with the big downdraft in precious metals selling that began in April. But we did get a good many things right.


We correctly forecast the average of both thermal and metallurgical coal prices for 2013 in the relative range of $90-100/ton for thermal and in the $140/ton range for metallurgical coal.


We also were proved right in predicting that the copper equities, particularly the large copper producers, would underperform in relation to the copper price. The copper price came off from an average, but the copper equities sold off significantly more.


TMR: How would you describe the current state of the mining space?


PR: We do see significant pressures on gold and silver prices, with the selloff of exchange-traded fund products continuing into 2014. At the same time, there are concerns that the Federal Reserve’s tapering will be whittled back. That will have the effect of improving the U.S. dollar. Overall, until we get some clear sense of direction, we think it’s a mixed bag.


TMR: VSA Capital CEO Andrew Monk predicts that the FTSE will finish the year at 72.50. It’s currently around 65.50. What will account for that 11%?



(...)Click here to continue reading the original ETFDailyNews.com article: For 2014 Gains, Look To Uranium, PGMs and Gems [Molycorp Inc, Lynas Corporation Limited, Freeport-McMoRan Copper & Gold Inc.]

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