When I first brought this idea to our publishers, they were skeptical to say the least... I was told in no uncertain terms that investors didn't want to hear about this.
I wrote up my report anyway.
It was on the South African mining industry, and I was recommending platinum. Here's the story in a nutshell.
South Africa had been chosen to host the 2010 World Cup, and there was a huge boom in construction and the economy at large. But I had my doubts. South Africa has a history of underinvestment in key infrastructure – like power grids – and an even worse history when dealing with unemployment and poverty.
This extended into the mining industry, which was seeing round after round of strikes. Conditions were deplorable. People were dying. As a result, the country's mining industry was on the verge of a mini-collapse.
Production of gold and platinum was taking big hits, and prices for both precious metals were climbing quickly.
Check out how gold and platinum performed since March 2010:
Platinum has climbed $200 an ounce and gold has climbed more than $350 an ounce.
But this dynamic is just one reason I was looking at Africa. It's part of a bigger idea that's been gaining some slow traction.
I'm talking about a "New Colonization" of Africa.
Take China, for example. China has been on a campaign to become the biggest global power in Africa, and it is succeeding. In early 2010, it was reported that China bought up half the farmland in Congo. Eastern Congo is home to vast mineral wealth.
China's also been after African oil reserves. It gave Angola – OPEC's newest member – $20 billion in reconstruction loans in 2009. In return, Angola has given China access to its oil. All told, between 2003 and 2008, Chinese direct investment in Africa has soared from $500 million to more than $8 billion... And that was before the massive loan to Angola.
The IMF said of Africa, "One of the least noticed aspects of the global downturn has been the resilience of the sub-Saharan Africa region."
And with plenty of international "suitors" waiting to scoop up access to natural resources, Africa may be the place to be over the next decade.
Case in point, from Bloomberg:
Royal Dutch Shell Plc (RDSA)'s $1.6 billion bid for Cove Energy Plc (COV) starts a race to develop natural-gas fields off Mozambique's Indian Ocean coast that may hold more than Norway's entire reserves.
Winning Cove would give Shell an 8.5% stake in a block where Anadarko Petroleum Corp. (APC) has found 30 trillion cubic feet of gas. Italy's Eni SpA (ENI) has discovered even more in a neighboring area. Together, there's sufficient fuel for the development of two $20 billion liquefied natural gas plants to supply customers in Asia, according to Deutsche Bank AG.
The fact that these reserves are on the east coast of Africa means a lot for power-hungry China. Even if China doesn't get in on the drilling side of this massive development, you can bet it'll want to buy a lot of the production.
That goes for India, too.
According to Sanford C. Bernstein & Co., demand for liquefied natural gas (LNG) is climbing at 20% a year in Asia. In fact, demand for LNG in China could double by 2015.
With that kind of demand, it's likely we'll see a number of bidders for this natural gas field.
That's good news for Anadarko Petroleum Corp. and Eni.
Keep an eye on Eni... If it wants to parcel off some of its East African natural gas, we could see this company break out of its downtrend.
I wouldn't be a buyer yet, but Eni's on my watch list.
The race is on for African resources, especially as growing emerging markets become fully developed. Indeed, China and India are already in the game, and it's rumored that India's Oil & Natural Gas Corp. was considering a bid for Cove Energy, as well.
This is going to be a major trend over the next few years.
Sara Nunnally is co-editor of Smart Investing Daily. As senior research director and global correspondent, Sara Nunnally's diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC's Squawk Box, as well as numerous radio shows around the country.
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