Florian Siegfried, head of precious metals and mining investments with Zurich-based AgaNola, says there are small signs—fewer equities participating in the recent rally, greater spreads in the high-yield market—that the sentiment toward gold is changing.
It’s no secret that mergers and acquisitions (M&A) activity in the mining sector is in the dumps. According to PWC, deal volume in the first half of 2013 declined 31% as compared to the same period last year. Deal value declined 74%.
It is clear that the time to dedicate resources to explore for new platinum mines and deposits outside South Africa has come. With a coming deficit market, new platinum projects in Canada patiently await inevitable courting by international platinum investors and producers.
Mining companies are now stepping back in time and are shifting exploration efforts to ever more remote, geo-politically challenged locations in a search for laterite ore because of a lack of discovery of new nickel sulfide deposits.
The strengthening of environmental groups, backed by foreign NGOs, means that mining firms are increasingly likely to be targeted with civil unrest and court action. This increases the risk of project delays, but also of license cancellation.
Platinum is thirty times rarer than gold, yet it is trading at a discount right now. However, this historic bargain situation may not last long as the current supply is under pressure from rising costs in South Africa.