Cart (0)
business newsWhy Mining Investors Must Follow Peru
Mining stocks in mining friendly jurisdictions are regaining their technical strength.
PRINT
What we are witnessing is no less than the ongoing sophistication of the third world. Peru is only the latest development in this continuum. “Nationalistas” -- Chavez in Venezuela, Morales in Bolivia, and Lula's successor and protégée, Dilma Rousseff in Brazil -- are raising the ante around the negotiating tables. One cannot help but wonder who is next? Mining investors are increasingly aware of civil unrest and geopolitical uncertainty. Recently they have been in favor of holding the underlying metal, causing a major divergence. There may be a reversion to the mean where high quality projects in mining friendly jurisdictions receive a premium. We must not forget that Peru was recently regarded as a mining haven and a model for foreign investment with such mining giants as Southern Copper (SCCO) and Buenaventura (BVN). Unfortunately 2011 has not been kind to investors in Peruvian equities, as Humala is an unknown and his election victory has significantly weakened assets in the country.
Mining stocks are beginning to emerge from a severe selloff starting in April. No doubt technical damage was inflicted. The recent correction was the most severe downturn in the past two years and had all of the earmarks of a classic panic as it momentarily broke 2011 lows.
We are in the greatest gold bull market since the 1970’s. The metal is up almost 500% over the last ten years. We went through an uncomfortable and painful short term correction in what has always been a volatile arena, add to this the summer doldrums, global unrest, economic uncertainty from the withdrawal from QE2, and the possible advent of QE3.
All of these imponderables add up to confuse and discourage investors. The markets have always done this in an attempt to create the transfer of wealth from weak hands to strong. This is the very essence of market place dynamics.
Mining stocks in mining friendly jurisdictions are regaining their technical strength. There is a divergence between the price of mining stock equities and its underlying assets in all sectors that my firm follows: gold, silver, rare earths, and uranium. However, for every action there is an equal and opposite reaction. The bounce could well be as frenetic on the rise as it has been panic ridden on the decline.
Start getting excited for the second half of 2011.
Editor's Note: Read more from Jeb Handwerger at Gold Stock Trades.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
