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TORONTO (miningweekly.com) – Sentiment remains negative about the mining and oil and gas industries as the supercycle nears a protracted potential bottom, resulting in dwindling market capitalisations for companies large and small and cruelly undervalued stock prices – creating a buyer’s market for the savvy investor.
CEO and chief investment officer at US Global Investors Frank Holmes, who specialises in natural resources and emerging markets investing, notes that the mining industry is on sale at the moment.
“The entire industry’s stocks are like a big Walmart sale. There’s a big sale happening right now, and it is the cheapest area of the equity markets by far,” he stated during the recent Cambridge House Resource Investment Conference in Vancouver.
Pan American Silver founder Ross Beaty agrees, saying this market is a phenomenal buying opportunity for oil and gas and mining stocks. “It’s a wonderful time to be in the market,” he says.
Market Collapse
The commodity price collapse of the past couple of years or so has left many resource firms trading at all-time lows, putting them in the territory of penny stocks. Since the start of the year, majors such as Anglo American, Glencore and BHP Billiton have all seen volatile trade, losing more than 10%. Mining companies are pruning back their businesses to survive in an era of lower commodity prices.
Glencore and Anglo have abandoned their dividends and sold assets. Gold majors such as Barrick Gold and Goldcorp have been selling noncore assets in efforts to repair indebted balance sheets, after gold fell from record highs.
Moody’s Investor Services recently fingered China’s economic slowdown for its gloomy outlook for the natural resources industry, citing a “substantial risk” that oil prices will recover only slowly from 12-year lows of less than $30/bl and prompting it to recalibrate its commodity price outlook for 2016.
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