mining for profits
TRANSCRIPT
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Mining for Profits:
Investing in Metals
Shohana Jannat
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Current & Future Trends
Weakening U.S. Dollar
Rising Inflation Expectations
Global Economic Growth & IncreasingDemand
Supply Shortages & TradeWars
Portfolio Diversification
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Metals in Focus
Gold
Silve
rCopper
Rare Earth
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Rushing to Gold
Gold is money. Thats it. - J. P. Morgan
You could hold dollar, you could hold yen, you could hold euro, youcould hold pound or you could hold gold.
- David Einhorn
Bull-Run after 2008 Global Financial Crisis
Continued Uncertainty ofWorld Economy
U.S. Deficit & Low Interest Rates Weak
Dollar
Global Demand Continuing to Rise
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Does Gold Produce Value?
You could take all the gold thats ever been mined, and itwould fill a cube 67 feet in each direction.
For what thats worth at current gold prices, you could buy all
not some all of the farmland in the United States. Plus,you could buy 10 Exxon Mobils, plus have $1 trillion ofwalking-around money.
Or you could have a big cube of metal.
Which would you take? Which is going to produce morevalue?
-Warren Buffett, Oct 19 2010, Fortune
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Is Gold Reallya Glittering Investment?
Few practical uses
Price moves on
o Sentiment on world eventso Inflation & currencies
No interest or dividend
payout
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Gold in 2011
Low short-term interest rates
Global gold mining production stagnant
2010 Global Mine Output = 2,652 tons (+1.2%from 2000)
Lack of large deposit discoveries
Greater volatility in world currencies
Weak Dollar
2010 Performance: +30% ($1,421/oz)
2011 Estimates: +13% $1,600/oz
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How to Invest in Gold
SPDR Gold Shares (GLD) $133.13 Equivalent of Gold @ $1,330.13
Highly Liquid Avg. Volume = 15.5M shares
Closest to Investing in Bullion
N
o Manage
me
nt Fee
s
Midas Fund (MIDSX) Invests in mining & processing companies
2010 Performance: +47%
Solid Management & Consistent Performance
TopHoldings: Newcrest Mining Ltd. (8.4%) | Barrick Gold Corp.(5.77%)
Expense Ratio: 2.29%
T Rowe Price & Fidelity Mutual Funds
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Store of Value
Global Manufacturing & Production
Increasing Greater Industrial Demand
Limited Supply Not Recycled
Poor Mans Gold
More Volatile than Gold
2010 Performance: +80%
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SI ($/oz) 1YR Performance
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iShares Silver Trust (SLV)
Last Trade: $29.85
Volume:
$5.36M share
s Closest to investing in real silver
2011 Estimate: $50/oz
2011 Outlook
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Copper Inventories in London Metal Exchange 30%
435,000 metric ton Deficitin 2011 (International Copper
Study Group) Supply Shortage!!
New Copper ETF Dec. 2010 More Pressure on Supply
Global Growth & Recovery = Greater Demand!!
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Downside Risks (1yr +)
More Chinese Tightening/HardLanding 8-10% Decrease inConsumption
More Diversified Supply Base (Chile,Peru, U.S.)
En Masse Sell-Off
Robust Demand Priced-In LimitedUpside
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Current Price: $4.62/lb
Bullish Outlook!
63%14%
13%10%
Usage
Building Construction
& Electronics
Transportation
Equipment
Consumer & General
Products
Industrial Machinery
& Equipment
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How to Invest in Copper
Global Copper Miners ETF (NYSE: COPX)
$20.229
iPath Dow Jones Copper Index (NYSE: JJC) $61.56
iShares MSCI Chile Index (NYSE: ECH)
$72.51
2011 EOY Estimates: $5.00/lb
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The future of rare earth is greatit is pure simplisticcapitalistic economics now Jim Rogers
China controls more than 97%
Uses of Rare Earth: Green energy Flat-screen monitors
High-Tech components Cell Phones
Examples: Dysprosium, Molybdenum, Neodymium
Dysprosium 2003: $6.50/lb | 2010: $132/lb(U.S. States Energy Department)
Average 2010 Performance: +250%
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Highest Magnetic Strength of All Elements
Dysprosium
2003:
$6.50/lb | 2010:
$132/lb(U.S. States Energy Department)
Uses
Clean-Energy Products Nuclear Reactors
Enhance thermal, magnetic & optical properties intechnology applications
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Rare Earth in 2011
Diminishing Supply = Higher Prices
China to Tighten Rare Earth Production(Reuters, Feb. 14, 2011)
Deposits subject to stricter gov. scrutiny
1/3 of world reserves
2010 export quotas cut by 40%
2011 Performance Outlook:Bullish!
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How to Invest in Rare Earth
Difficult to invest in rareearth
Most ETFs/Funds are traded on foreign exchanges
Avalon Rare Metals Inc. (NYSE: AVL)Canadian mineral exploration & development company
Focus on rare metals
100%-owned Nechalacho Deposit one of few sourcesoutside of China
Well Funded, No Debt, Strong Growth Perspectives Current Price: $7.96
Market Cap: $743.00M
Negative Earnings
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Direct Ownership
Mutual Funds
Exchange-Traded Funds (ETFs)
Futures Contracts
Stock
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Buying minted coins/bars
Ultimate Pure Value
Jewelry
Safe
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Diversification of index fund
Ability to Short Sell
Lower/No Expense Ratios
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Diversification across variety of investment
products for different metals
Profe
ssional manage
me
nt of fund Fees
Different Objectives:
Long-
te
rmcapital appr
eciation
Hedge against inflation
Aggressive short-term capital gains
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Why Invest in Metals Futures Contract Hedge against inflation
Speculative play
Alternative investment class
Advantages
Centralized exchange
Financial l
eve
rage
Flexibility
No counterparty risk
Higher risk/Higher return
Disadvantages
Substantial Risk
Potential to losemore money then
originally invested
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