We are approaching an inflection point in the economy and the metals markets favorable to precious metals and mining equities. Moving beyond 2008, investors long in mining and metals equities are no longer burdened by the combination of redemptions and tax loss selling. While producers appear less risky, we see mining and metal equities with development potential as offering the greatest leverage for appreciation in the new year.
Increasing operating costs in 2007 and declining metal prices in 2008 have increased development risk and squeezed operating margins. Turmoil in the credit and housing markets have reduced access to capital, exacerbating a lengthy decline in both precious and base metals mining equities to the lowest level in several years.
Slower levels of economic growth worldwide have led to higher than anticipated inventories, declining base metal prices, and shelving base metal projects. As we anticipated, this has produced increased availability of labor and equipment leading to moderating operating and development costs. While in many cases, base metal prices have declined to below required levels for production, precious metal prices remain above real long-term price levels.
Most Economists say that the year 2009 will be the year of the bull market of Gold and Silver. Where there is much of a fuss that 'everything' is going to be alright in the world economy, ultimately it is the ones who will prepare for the coming economic upheaval that will spared and where wealth will transfer TO.
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