5 Takeaways From The Vancouver Natural Resources Conference

I was happy to speak recently at the Vancouver Natural Resources Conference in beautiful British Columbia. I also had the pleasure of listening to a variety of presentations by some of the most influential names in the investment world, and met a few new faces along the way.

Here is what I took away from this year’s visit to Vancouver:

1) London’s dirty little secret. My good friend Robert Friedland, executive chairman and founder of Ivanhoe Mines, painted a startling picture of an increasingly polluted London, England, during his speech. Did you know the city’s air pollution is now worse than Beijing’s? Not only that, Paris hit life-threatening pollution levels this year and the World Health Organization even stated that pollution is the world’s single-biggest environmental health risk. Hard to believe, isn’t it?

Friedland says the answer to healthier air is the “new gold,” or platinum group metals (PGMs).

By using PGMs in catalytic convertors, harmful diesel emissions can be better controlled and less carbon monoxide is produced. As urbanization continues, investors should remain aware of inevitable pollution in larger cities, and in turn, that the use of PGMs will help minimize these effects. Demand should rise as supply lowers, pushing the metals’ prices higher.

Earlier this year I wrote that platinum and palladium looked very compelling, and the metals continue to be relevant in both the auto industry and medical industry. 

2) Russia is America’s biggest problem, according to Marin Katusa of Casey Research. Not only does Russia produce more oil and natural gas than any other country, it’s also exerting control over the uranium sector. America has long been the number one consumer of uranium, and at one time was the largest producer, but that’s all changing. The American uranium stockpile has been reduced to an amount that will last roughly three more years.

The U.S. Department of Energy (DOE) used to release a certain amount of uranium into the market each year, but in 2013 the DOE began dumping what little uranium the U.S. does have and selling it to the spot market at a lower cost. President Barack Obama did this in order to raise enough money to pay for previous cleanups.

There isn’t enough uranium left to fulfill our needs if you compare the amount the U.S. produces with the amount the U.S. requires. It’s not only America. Much of the world is looking for sources of uranium to meet demand factors. The World Nuclear Organization shows in the chart below that one reason for the shortfall in uranium supply from mines is that early production went straight into military inventories and civil stockpiles.

We need Russia, whether we like it or not. When it comes to commodities such as uranium, it’s important to be aware of how performance rotates each year, giving you a leg up on finding commodities with upside potential. Looking into 2015, Marin says uranium could make big moves.

3) Energy is the most consistent story of our lifetime. Karim Rahemtulla, Chief Resource Analyst at Wall Street Daily, used this statement to emphasize the ongoing strength we are seeing in the energy sector. He says better technology is leading to new finds from Brazil all the way to the Mediterranean, and even with controversial techniques like fracking, it’s easy to see just how much oil and gas have been recovered across various shale plays in the last few years. The production numbers are unbelievable.

U.S. Global Investors released a Special Energy Report detailing the American energy renaissance we are currently living through, along with ways to benefit from this tremendous growth. Karim says the growth will continue: industrial demand for natural gas is set to increase by 20 percent in the next five years, and consumer demand is increasing annually at a faster pace than oil. The trends we are seeing in this space should continue for another 15 to 20 years, including increased use, new sources of supply, emerging growth and political benefits.

4) One in every 3,000 projects actually becomes a working mine – I visited two of these. The Saturday following the conference I joined other CEOs, hedge fund managers, newsletter writers and curious investors on a special trip to see two open pit mines in Southern British Columbia. What an experience it was. Marin Katusa of Casey Research organized this trip that took our group of around 50 to see gold and copper mines. Elk Project of Gold Mountain Mining Corp.

was our first stop.

This type of “boots on the ground” experience helps form the tacit knowledge investors and fund managers need to stay curious about the sectors and companies they invest in. I believe implicit knowledge – sticking simply to data and numbers – can only get you so far. Being able to see the Elk Project up close was remarkable – this company is organized and entrepreneurial, and has reported good potential for open pit mining operations such as this one. The Elk Project plans to expand its existing resources using an aggressive drill program.

5) Innovation and technology at Copper Mountain Mining. The second stop on our trip was the open pits at Copper Mountain Mining’s operations. Copper Mountain processes around 35,000 tonnes a day, requiring the company to use bigger, more innovative and more efficient equipment. During our tour we saw one of the pits, which was 200 meters deep. But what I found most impressive was the infrastructure and equipment the company uses.

Copper Mountain has haul trucks with high-efficiency diesel engines and hydraulic front-loading shovels with 42-cubic-meter buckets. The tires alone have a price tag of $40,000, and are equipped with microchips to measure temperature and pressure data remotely.

The property is also run by a computerized control system, which tracks everything from the crusher to the water system and even the truck traffic on site. 

Companies like Copper Mountain are moving fast, making things happen and using new technology to regenerate life into one of the oldest mines in BC. Investors should pay attention to companies such as this, which are making enormous strides and adding credibility to their names.

These trends all have important implications on where to find investment opportunities. Sometimes you have to dig a little deeper and put yourself in the middle of the action, and other times it’s simply about staying curious to learn about what is going on right in front of you. I encourage my readers and shareholders to stay curious to learn, because with curiosity comes improvement and opportunity.

If you were unable to attend the conference, I invite you to download my presentation, From Asia with Love – The Ups & Downs in the World of Resources.

******** 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Fund portfolios are actively managed, and holdings may change daily. Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more of U.S. Global Investors Funds as of 06/30/2014:  Ivanhoe Mines Ltd.