We just got word from our trading partners at the International Speculator. Their message? "Own this sleeper stock that's running through April". The metals sector research team believes this will be the next high grade gold producer. If you want to make a fortune in the resource sector, all you need to know are the two times you should buy gold stocks.
The first: Invest in a gold mining company just before it makes a tremendous discovery.
Obviously, this is a daunting task. And without hands-on experience or a field research, you’d have better odds at winning roulette.
The second: Buy shares of a gold mining company just before it starts producing.
When a mining company announces its “First Gold Pour” is usually the only time it makes headlines, outside of a discovery. From that day forward, it’s a cash generating producer… and the value is no longer trapped in the rocks. That’s when the big money institutional investors take interest. Once they pile in, shares move very quickly.
Of course, there are very few new gold mines opening up in the world at any given time. So these opportunities are quite rare.
But today, you have the chance to jump on one. We have found a deeply undervalued mining company with a high grade deposit 8x richer than the average mine.
Today, shares are cheap. But it’s scheduled to start pouring gold for the first time very soon—after that, shares could soar.
In fact, Louis James, the chief metals and mining investment strategist at Case Research, believes this company could at least double in value.
But only investors who act before April 30 will have the chance to realize these gains.
Click here for all the details of this incredible opportunity
See you in the markets!
Ray C. Parrish
aka the Crude Oil Trader
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Showing posts with label resource. Show all posts
Showing posts with label resource. Show all posts
Wednesday, April 15, 2015
Saturday, March 8, 2014
What 10 Baggers (and 100 Baggers) Look Like
By Jeff Clark, Senior Precious Metals Analyst
Now that it appears clear the bottom is in for gold, it’s time to stop fretting about how low prices will drop and how long the correction will last—and start looking at how high they’ll go and when they’ll get there. When viewing the gold market from a historical perspective, one thing that’s clear is that the junior mining stocks tend to fluctuate between extreme boom and bust cycles. As a group, they’ll double in price, then crash by 75%..... then double or triple or even quadruple again, only to crash 90%. Boom, bust, repeat.Given that we just completed a major bust cycle—and not just any bust cycle, but one of the harshest on record, according to many veteran insiders—the setup for a major rally in gold stocks is right in front of us.
This may sound sensationalistic, but based on past historical patterns and where we think gold prices are headed, the odds are high that, on average, gold producers will trade in the $200 per share range before the next cycle is over. With most of them currently trading between $20 and $40, the returns could be stupendous. And the percentage returns of the typical junior will be greater by an order of magnitude, providing life changing gains to smart investors.
What you’re about to see are historical returns of both producers and juniors during three separate boom cycles. These are factual returns; they are not hypothetical. And if you accept the fact that this market moves in cycles, you know it’s about to happen again.
Gold had a spectacular climb in 1979-1980, and gold stocks in general gave a staggering performance at that time—many of them becoming 10-baggers (1,000% gains and more). While this is a well known fact, few researchers have bothered to identify exact returns from specific companies during this era.
Digging up hard data from before the mid-1980s, especially for the junior explorers, is difficult because the information wasn’t computerized at the time. So I sent my nephew Grant to the library to view the Wall Street Journal on microfiche. We also include information we’ve had from Scott Hunter of Haywood Securities; Larry Page, then-president of the Manex Resource Group; and the dusty archives at the Northern Miner.
Note: This means our tables, while accurate, are not at all comprehensive.
Let’s get started…...
The Quintessential Bull Market: 1979-1980
The granddaddy of gold bull cycles occurred during the 1970s, culminating in an unabashed mania in 1979 and 1980. Gold peaked at $850 an ounce on January 21, 1980, a rise of 276% from the beginning of 1979. (Yes, the price of gold on the last trading day of 1978 was a mere $226 an ounce.)
| Returns of Producers in 1979-1980 Mania | |||
| Company | Price on 12/29/1978 | Sept. 1980 Peak | Return |
| Campbell Lake Mines | $28.25 | $94.75 | 235.4% |
| Dome Mines | $78.25 | $154.00 | 96.8% |
| Hecla Mining | $5.12 | $53.00 | 935.2% |
| Homestake Mining | $30.00 | $107.50 | 258.3% |
| Newmont Mining | $21.50 | $60.62 | 182.0% |
| Dickinson Mines | $6.88 | $27.50 | 299.7% |
| Sigma Mines | $36.00 | $57.00 | 58.3% |
| Giant Yellowknife Mines | $11.13 | $39.00 | 250.4% |
| AVERAGE | 289.5% | ||
Today, GDX is selling for $26.05 (as of February 26, 2014); if it mimicked the average 289.5% return, the price would reach $101.46.
Keep in mind, though, that our data measures the exact top of each company’s price. Most investors, of course, don’t sell at the very peak. If we were to able to grab, say, 80% of the climb, that’s still a return of 231.6%.
Here’s a sampling of how some successful junior gold stocks performed in the same period, along with the month each of them peaked.
| Returns of Juniors in 1979-1980 Mania | ||||
| Company | Price on 12/29/1978 | Price Peak | Date of Peak | Return |
| Carolin Mines | $3.10 | $57.00 | Oct. 80 | 1,738.7% |
| Mosquito Creek Gold | $0.70 | $7.50 | Oct. 80 | 971.4% |
| Northair Mines | $3.00 | $10.00 | Oct. 80 | 233.3% |
| Silver Standard | $0.58 | $2.51 | Mar. 80 | 332.8% |
| Lincoln Resources | $0.78 | $20.00 | Oct. 80 | 2,464.1% |
| Lornex | $15.00 | $85.00 | Oct. 80 | 466.7% |
| Imperial Metals | $0.36 | $1.95 | Mar. 80 | 441.7% |
| Anglo-Bomarc Mines | $1.80 | $6.85 | Oct. 80 | 280.6% |
| Avino Mines | 0.33 | 5.5 | Dec. 80 | 1,566.7% |
| Copper Lake | $0.08 | $10.50 | Sep. 80 | 13,025.0% |
| David Minerals | $1.15 | $21.00 | Oct. 80 | 1,726.1% |
| Eagle River Mines | $0.19 | $6.80 | Dec. 80 | 3,478.9% |
| Meston Lake Resources | $0.80 | $10.50 | Oct. 80 | 1,212.5% |
| Silverado Mines | $0.26 | $10.63 | Oct. 80 | 3,988.5% |
| Wharf Resources | $0.33 | $9.50 | Nov. 80 | 2,778.8% |
| AVERAGE | 2,313.7% | |||
If you had bought a reasonably diversified portfolio of top-performing gold juniors prior to 1979, your initial investment could have grown 23 times in just two years. If you had managed to grab 80% of that move, your gains would still have been over 1,850%.
This means a junior priced at $0.50 today that captured the average gain from this boom would sell for $12 at the top, or $9.75 at 80%. If you own ten juniors, imagine just one of them matching Copper Lake’s better than 100-bagger performance.
Here’s what returns of this magnitude could mean to you. Let’s say your portfolio includes $10,000 in gold juniors that yield spectacular gains such as the above. If the next boom cycle matches the 1979-1980 pattern, your portfolio could be worth $241,370 at its peak… or about $195,000 if you exit at 80% of the top prices.
Note that this does require that you sell to realize your profits. If you don’t take the money and run at some point, you may end up with little more than tears to fill an empty beer mug. In the subsequent bust cycle, many junior gold stocks, including some in the above list, dried up and blew away. Investors who held on to the bitter end not only saw all their gains evaporate, but lost their entire investments.
You have to play the cycle.
Returns from that era have been written about before, so I can hear some investors saying, “Yeah, but that only happened once.”
Au contraire. Read on…...
The Hemlo Rally of 1981-1983
Many investors don’t know that there have been several bull cycles in gold and gold stocks since the 1979-1980 period.
Back in the day, most exploration was done by teams from the major producers. But because of lagging gold prices and the resulting need to cut overhead, they began to slash their exploration budgets, unleashing a swarm of experienced geologists armed with the knowledge of high potential mineral targets they’d explored while working for the majors. Many formed their own companies and went after these targets.
This led to a series of spectacular discoveries, the first of which occurred in mid 1982, when Golden Sceptre and Goliath Gold discovered the Golden Giant deposit in the Hemlo area of eastern Canada. Gold prices rallied that summer, setting off a mini bull market that lasted until the following May. The public got involved, and as you can see, the results were impressive for such a short period of time.
| Returns of Producers Related to Hemlo Rally of 1981-1983 | ||||
| Company | 1981 Price | Price Peak | Date of High | Return |
| Agnico-Eagle | $9.50 | $21.00 | Aug. 83 | 121.1% |
| Sigma | $14.13 | $24.50 | Jan. 83 | 73.4% |
| Campbell Red Lake | $16.63 | $41.25 | May 83 | 148.0% |
| Sullivan | $3.85 | $6.00 | Mar. 84 | 55.8% |
| Teck Corp Class B | $17.00 | $21.88 | Jun. 81 | 28.7% |
| Noranda | $33.75 | $36.38 | Jun. 81 | 7.8% |
| AVERAGE | 72.5% | |||
Gold producers, on average, returned over 70% on investors’ money during this period. While these aren’t the same spectacular gains from just a few years earlier, keep in mind they occurred over only about 12 months’ time. This would be akin to a $20 gold stock soaring to $34.50 by this time next year, just because it’s located in a significant discovery area.
Once again, it was the juniors that brought the dazzling returns.
| Returns of Juniors Related to Hemlo Rally of 1981-1983 | ||||
| Company | 1981 Price | Price Peak | Date of High | Return |
| Corona Resources | $1.10 | $61.00 | May 83 | 5,445.5% |
| Golden Sceptre | $0.40 | $31.00 | May 83 | 7,650.0% |
| Goliath Gold | $0.45 | $32.00 | Mar 83 | 7,011.1% |
| Bel-Air Resources | $0.81 | $1.60 | Jan. 83 | 97.5% |
| Interlake Development | $2.10 | $6.40 | Mar. 83 | 204.8% |
| AVERAGE | 4,081.8% | |||
The average return for these junior gold stocks that had a direct interest in the Hemlo area exceeded a whopping 4,000%.
This is especially impressive when you realize that it occurred without the gold stock industry as a whole participating. This tells us that a big discovery can lead to enormous gains, even if the industry as a whole is flat.
In other words, we have historical precedence that humongous returns are possible without a mania, by owning stocks with direct exposure to a discovery area. There are numerous examples of this in the past ten years, as any longtime reader of the International Speculator can attest.
By May 1983, roughly a year after it started, gold prices started back down again, spelling the end of that cycle—another reminder that one must sell to realize a profit.
The Roaring ’90s
By the time the ’90s rolled around, many junior exploration companies had acquired the “intellectual capital” they needed from the majors. Another series of gold discoveries in the mid-1990s set off one of the most stunning bull markets in the current generation.
By the summer of ’96, these discoveries had sparked another bull cycle, and companies with little more than a few drill holes were selling for $20 a share.
The table below, which includes some of the better-known names of the day, is worth the proverbial thousand words. The average producer more than tripled investors’ money during this period. Once again, these gains occurred in a relatively short period of time, in this case inside of two years.
| Returns of Producers in Mid-1990s Bull Market | ||||
| Company | Pre-Bull Market Price | Price Peak | Date of High | Return |
| Kinross Gold | $5.00 | $14.62 | Feb. 96 | 192.4% |
| American Barrick | $28.13 | $44.25 | Feb. 96 | 57.3% |
| Placer Dome | $26.50 | $41.37 | Feb. 96 | 56.1% |
| Newmont | $47.26 | $82.46 | Feb. 96 | 74.5% |
| Manhattan | $1.50 | $13.00 | Nov. 96 | 766.7% |
| Cambior | $10.00 | $22.35 | Jun. 96 | 123.5% |
| AVERAGE | 211.7% | |||
Here’s how some of the juniors performed. And if you’re the kind of investor with the courage to buy low and the discipline to sell during a frenzy, it can be worth a million dollars. Hold on to your hat.
| Returns of Juniors in Mid-1990s Bull Market | ||||
| Company | Pre-Bull Market Price | Price Peak | Date of High | Return |
| Cartaway | $0.10 | $26.14 | May 96 | 26,040.0% |
| Golden Star | $6.00 | $27.50 | Oct. 96 | 358.3% |
| Samex Mining | $1.00 | $7.20 | May 96 | 620.0% |
| Pacific Amber | $0.21 | $9.40 | Aug. 96 | 4,376.2% |
| Conquistador | $0.50 | $9.87 | Mar. 96 | 1,874.0% |
| Corriente | $1.00 | $19.50 | Mar. 97 | 1,850.0% |
| Valerie Gold | $1.50 | $28.90 | May 96 | 1,826.7% |
| Arequipa | $0.60 | $34.75 | May 96 | 5,691.7% |
| Bema Gold | $2.00 | $12.75 | Aug. 96 | 537.5% |
| Farallon | $0.80 | $20.25 | May 96 | 2,431.3% |
| Arizona Star | $0.50 | $15.95 | Aug. 96 | 3,090.0% |
| Cream Minerals | $0.30 | $9.45 | May 96 | 3,050.0% |
| Francisco Gold | $1.00 | $34.50 | Mar. 97 | 3,350.0% |
| Mansfield | $0.70 | $10.50 | Aug. 96 | 1,400.0% |
| Oliver Gold | $0.40 | $6.80 | Oct. 96 | 1,600.0% |
| AVERAGE | 3,873.0% | |||
Many analysts refer to the 1970s bull market as the granddaddy of them all—and to a certain extent it was—but you’ll notice that the average return of these stocks during the late ’90s bull exceeds what the juniors did in the 1979-1980 boom.
This is akin to that $0.50 junior stock today reaching $19.86… or $16, if you snag 80% of the move. A $10,000 portfolio with similar returns would grow to over $397,000 (or over $319,000 on 80%).
Gold Stocks and Depression
Those of you in the deflation camp may dismiss all this because you’re convinced the Great Deflation is ahead. Fair enough. But you’d be wrong to assume gold stocks can’t do well in that environment.
| Returns of Producers During the Great Depression | |||
| Company | 1929 Price | 1933 Price | Total Gain |
| Homestake Mining | $65 | $373 | 474% |
| Dome Mines | $6 | $39.50 | 558% |
During a period of soup lines, crashing stock markets, and a fixed gold price, large gold producers handed investors five and six times their money in four years. If deflation “wins,” we still think gold equity investors can, too.
How to Capitalize on This Cycle
History shows that precious metals stocks move in cycles. We’ve now completed a major bust cycle and, we believe, are on the cusp of a tremendous boom. The only way to make the kind of money outlined above is to buy before the boom is in full swing. That’s now. For most readers, this is literally a once in a lifetime opportunity.
My colleague Louis James, Casey’s chief metals and mining investment strategist, has identified the nine junior mining stocks that are most likely to become 10 baggers this year in their special report, the 10-Bagger List for 2014. Read more here.
The article What 10-Baggers (and 100-Baggers) Look Like was originally published at Casey Research.
Thursday, February 27, 2014
Doug Casey: “There’s Going to be a Bubble in Gold Stocks”
By Doug Casey
The following video is an excerpt from "Upturn Millionaires—How to Play the Turning Tides in the Precious Metals Market." In it, natural resource legends Doug Casey and Rick Rule discuss the deeply undervalued junior mining sector and the rare opportunity for spectacular returns it offers investors right now.
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Discover for yourself how to make life changing gains in the new bull run in junior mining stocks. They still trade at deep discounts, but not for much longer.
To learn more, watch the full "Upturn Millionaires" video here.
This may be your last time to catch the replay...."Being the Architect of the Big Trade"
Monday, February 24, 2014
Why the Resource Supercycle Is Still Intact
By Rick Rule, Chairman and Founder, Sprott Global Resource Investments
Natural resource based industries are very capital intensive, and hence extremely cyclical. It is not unreasonable to say that as a natural resource investor, you are either contrarian or you will be a victim.These markets are risky and volatile!
Why Cyclicality?
Let's talk about cyclicality first. Some of the cyclicality of these industries is a function of their being extraordinarily capital intensive. This lengthens the companies' response times to market cycles.
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Strengthening copper prices, for example, do not immediately result in increased copper production in many market cycles, because the production cycle requires new deposits to be discovered, financed, and constructed......a process that can consume a decade.
Price declines—even declines below the industry's total production costs—do not immediately cause massive production cuts. The "sunk capital" involved in discovery and construction of mining projects and attendant infrastructure (such as smelters, railways, and ports) causes the industry to produce down to, and sometimes below, their cash costs of production.
Producers often engage in a "last man standing" contest, to drive others to mothball productive assets, citing the high cost of shutdown and restart. They fail to mention their conflicts of interest as managers, whose compensation is linked to running operational mines.
Interest-rate cycles can raise or lower the cost and availability of capital, and the accompanying business cycles certainly influence demand. Given the "trapped" nature of the industry's productive assets, local political and fiscal cycles can also influence outcomes in natural-resource investments.
Today, I believe that we are still in a resource "supercycle," a long-term period of increasing commodity prices in both nominal and real terms. The market conditions of the past two years have made many observers doubt this assertion. But I believe the current cyclical decline is a normal and healthy part of the ongoing secular bull market.
Has this happened in the past?
The most striking analogy to the current situation occurred in the epic gold bull market in the 1970s. Many of you will recall that in that bull market, gold prices advanced from US$35 per ounce to $850 per ounce over the course of a decade. Fewer of you will recall that in the middle of that bull market, in 1975 and 1976, a cyclical decline saw the price of gold decline by 50%, from about $200 per ounce down to about $100 per ounce. It then rebounded over the next six years to $850 per ounce.
Investors who lacked the conviction to maintain their positions missed an 850% move over six short years. The current gold bull market, since its inception in 2000, has experienced eight declines of 10% or greater, and three declines—including the present one—of more than 20%.
This volatility need not threaten the investor who has the intellectual and financial resources to exploit it.
The natural-resources bull market lives…
The supercycle is a direct result of several factors. The most important of these is, ironically, the deep resource bear markets which lasted for almost two decades, commencing in 1982.
This period critically constrained investment in a capital-intensive industry where assets are depleted over time.
Productive capacity declined in every category; very little exploration took place; few new mines or oilfields replenished reserves; infrastructure and processing assets deteriorated. Critical human-resource capabilities suffered as well; as workers retired or got laid off, replacements were neither trained nor hired.
National oil companies (NOCs) exacerbated this decline in many nations by milking their oil and gas industries to subsidize domestic spending programs for political gain. This was done at the expense of sustaining capital investments. The worst examples are Mexico, Venezuela, Ecuador, Peru, Indonesia, and Iran. I believe 25% of world export crude capacity may be at risk from failure of NOCs to maintain and expand their productive assets.
Demands for social contributions in the form of taxes, royalties, carried equity interests, social or infrastructure contributions, and the like have increased. Voters are not concerned that producers need real returns to recover from two decades of underinvestment or to fund capital investments to offset depletion. Today this is actively constraining investment, and hence supply.
Poor people getting richer…
The supercycle is also driven by globalization and the social and political liberalization of emerging and frontier markets. As people become freer, they tend to become richer.
As poor countries become less poor, their purchases tend to be very commodity centric, especially compared to Western consumers. For the 3.5 billion people at the bottom of the economic pyramid, the goods that provide the most utility are material goods and consumables, rather than the information services or "high value-added" goods.
A poor or very poor household is likely to increase its aggregate calorie consumption—both by eating more food and more energy-dense food like meat. They will likely consume more electrical power and motor fuel and upgrade their home from adobe or thatch to higher-quality building materials. As people's incomes increase in developing and frontier markets, the goods they buy are commodity-intensive, which drives up demand per capita. And we are talking billions of "capitas."
Rising incomes and savings among certain cultures in the Middle East, South Asia, and East Asia—places with a strong cultural affinity for bullion—have increased the demand for gold, silver, platinum, and palladium bullion. Bullion has been a store of value in these regions for generations, and rising incomes have generated physical bullion demand that has surprised many Western-centric analysts.
Competitive devaluation
The third important driver in this cycle has been the depreciation of currencies and the impact that has had on nominal pricing for resources and precious metals.
Most developed economies have consumed and borrowed at worrying levels. The United States federal government has on-balance-sheet liabilities of over $16 trillion, and off-balance-sheet liabilities estimated at around $70 trillion.
These numbers do not include state and local government liabilities, nor the likely liabilities from underfunded private pensions. Not to mention increased costs associated with more comprehensive health care and an aging population!
Many analysts are even more concerned about the debts and liabilities of other developed economies—Europe and Japan. In both places, debt-to-GDP ratios are greater than in the US. Europe and Japan are financing themselves through a combination of artificially low interest rates and more borrowing and money printing. This drives down the value of their currencies, helping their exports.
But which nations' leaders will stand firm and allow their export industries to wither as their domestic producers suffer from cheap competing foreign goods? If Japan's Abe is successful at increasing his country's exports at the expense of its competitors like Taiwan, Korea, or China, then his policies could lead to competitive devaluation. And how will the European community react, for that matter?
Loss of purchasing power in fiat currencies increases the nominal pricing of commodities and drives demand for bullion as a preferred savings vehicle.
The factors that have driven this resource supercycle have not changed. Demand is increasing. Supplies are constrained. Currencies are weakening. Thus I believe we remain in a secular bull market for natural resources and precious metals.
With that in mind, I would call the current market for bullion and resource equities a sale.
Where to invest?
Let's talk about a type of company most of us follow: mineral exploration companies, or "juniors." We often confuse the minerals exploration business with an asset-based business. I would argue that is a mistake.
Entities that explore for minerals are actually more similar to "the research and development" space of the mining industry. They are knowledge based businesses.
When I was in university, I learned that one in 3,000 "mineralized anomalies" (exploration targets) ended up becoming a mine. I doubt those odds have improved much in 40 years. So investors take a 1-in-3,000 chance in order to receive a 10-to-1 return.
These are not good odds. But understanding the industry improves them substantially.
Exploration companies are similar to outsourcing companies. Major mining companies today conduct relatively little exploration. Their competitive advantage lies in scale, financial stability, and engineering and construction expertise. Similar to how big companies in other sectors outsource certain tasks to smaller, more specialized shops, the big miners let the juniors take on exploration risk and reward the successful ones via acquisitions.
Major companies are punished rather than rewarded for exploration activities in the short term. Majors therefore tend to focus on the acquisition of successful juniors as a growth strategy.
Today, the junior model is broken. Many public exploration companies spend a majority of their capital on general and administrative expenses, including fundraising. Overlay a hefty administrative load on an activity with a slim probability of success, and these challenges become even more severe.
One response from the exploration and financial community has been to put less emphasis on exploration success and focus instead on "market success." In this model, rather than "turning rocks into money," the process becomes "turning rocks into paper, and paper into money."
One manifestation of that is the juniors' habit of recycling exploration targets that have failed repeatedly in the past but can be counted on to yield decent confirmation holes, and the tendency to acquire hyper-marginal deposits and promote the value of resources underground without mentioning the cost of actually extracting them.
The industry has been quite successful, during bull markets, at causing "sophisticated" investors to focus on exciting but meaningless criteria.
Being successful in natural resource investing requires you to make choices. If your broker convinces you to buy the sector as a whole, they will have lived up to their moniker—you will become "broker" and "broker."
We have already said that exploration is a knowledge-based business. The truth is that a small number of people involved in the sector generate the overwhelming majority of the successes. This realization is key to improving our odds of success.
"Pareto's law" is the social scientists' term for the so-called "80-20 rule," which holds that 80% of the work is accomplished by 20% of the participants.
A substantial body of evidence exists that it is roughly true across a variety of disciplines. In a large enough sample, this remains true within that top 20%—meaning 20% of the top 20%, or 4% of the population, contributes in excess of 60% of the utility.
The key as investors is to judge management teams by their past success. I believe this is usually much more relevant than their current exploration project.
It is important as well that their past successes are directly relevant to the task at hand. A mining entrepreneur might have past success operating a gold mine in French speaking Quebec. Very impressive, except that this same promoter now proposes to explore for copper, in young volcanic rocks, in Peru!
In my experience, more than half of the management teams you interview will have no history of success that shows that they are apt at executing their current project.
Management must be able to identify the most important unanswered question that can make or break the project. They must be able to say how that question or thesis was identified, explain the process by which the question will be answered, the time required to answer the question, how much money it will take. They also need to know how to recognize when they have answered the question. Many of the management teams you interview will be unable to address this sequence of questions, and therefore will have a very difficult time adding value.
The resource sector is capital intensive and highly cyclical, and we expect that the current pullback is a cyclical decline from an overheated bull market. The fundamental reasons to own natural resource and precious metals have not changed. Warren Buffett says, "Be brave when others are afraid, be afraid when others are brave." We are still "gold bugs." And even "gold bulls."
Rick Rule is the chairman and founder of Sprott Global Resource Investments Ltd., a full-service brokerage firm located in Carlsbad, CA. He has dedicated his entire adult life to different aspects of natural-resource investing and has a worldwide network of contacts in the natural-resource and finance worlds.
Watch Rick and an all-star cast of natural-resource and investment experts—including Frank Giustra, Doug Casey, John Mauldin, and Ross Beaty—in the must-see video "Upturn Millionaires," and discover how to play the turning tides in junior mining stocks, for potentially life changing gains. Click here to watch.
The article Why the Resource Supercycle Is Still Intact was originally published at Casey Research.com.
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Monday, October 25, 2010
UL: The End of Oil's Golden Age
Also, approximately 15% of oil is used to make asphalt, plastics and a wide variety of critical chemical products. Therefore, crude oil plays a key role in the modern globalized world economy. It has truly enabled a golden age for those that can afford to leverage it.
Unfortunately, oil is a finite resource and some day we will run out of it if we continue consuming it like we do. Long before this happens we will have serious problems, as soon as demand exceeds the supply. This is the essence of “peak oil” concept. International Energy Agency (IEA) estimated in their 2008 World Energy Outlook that oil production should not peak before 2030 if 64 million barrels per day (mb/d) of additional capacity is taken into use between 2007 and 2030.
In theory this is possible, but in practice there is a very real risk of under investment since the required new capacity is equivalent to six times the current production of Saudi Arabia. Therefore, the report concludes that an oil supply crunch can happen as early as 2015.
It is immensely hard to estimate the maximum rate at which the oil can be extracted from all different sources, both conventional and unconventional. Therefore, it is also hard to estimate when oil production will peak. What seems fairly certain is that it will do so within the next 30 years, and I personally believe it will happen within the next 10 years......Read the entire article.
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