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No rush to buy resource stocks

Tom Winnifrith
Sunday 28 April 2013

Calling the bottom of any market is always impossible. I leave that to cleverer, if illiterate, folk than me. i.e. chartists like my good pal Zak Mir. But it strikes me that those who regard now as an opportune time to get back into mining (and plausibly oil) stocks are getting ahead of themselves. Yes, the sectors have performed abjectly. But I sense that there is far worse to come.

The story starts a few years ago when gold was racing ahead, folks were convinced that China would consume 120% of every tonne of base metals produced and that it would do the same for oil. Extrapolating these macro trends into a super cycle allowed an awful lot of marginal project,s or even non-projects, and arguably just dreams, to gain a stock market listing and secure equity finance. In the four or five years that have followed a few things have changed.

Firstly, it has become abundantly clear to investors that management teams across the resources sectors live the life of riley, awarding themselves huge pay packages and jetting here there and everywhere at vast expense. Generally having a great old time.

Secondly, very few of these management teams have delivered anything in terms of value creation. There are actually more mining companies in the world than there are projects to work on

on Spreadbet Magazine | Comments
About Tom Winnifrith
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Tom Winnifrith is the editor of TomWinnifrith.com. When he is not harvesting olives in Greece, he is (planning to) raise goats in Wales.
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