To Kipp and Wade
I have read all of your recent posts on mining stocks and a lot more related material as well. I'm of the view that to think of metal prices in the context of a four year cycle is completely wrong. It takes about 10 years from discovery to production for a new mine. At this point in the cycle we are getting very few new mines but a fair number of re-opennings of previously closed mines. Of course a re-openning takes a shorter period of time (I'd guess on average about 3 years).
Of all the metals, my only concern at this time is about copper and I guess you could say that I'm in the wait and see camp i.e. I'll start buying copper companies when I see demand pick up (i.e. LME inventories going down).
So what is my current approach to metal stock purchases? It can best be exemplified by referring to a post I made on another board which I will reproduce here for reader ease.
" I am a relatively new investor in SPM and find it very surprising that many of you seem somewhat nervous about continuing to hold or buy SPM (in part perhaps because of today's selloff in most metal stocks). [I guess I could have been referring to Wade here] So let's just think about metal markets and Scorpio's positioning. Copper prices are under a lot of pressure, zinc and lead are at all time highs, nickel is very strong but is failing to set new highs for now, gold and especially silver are rallying strongly. So what about Scorpio? Based upon the current value of it's resource base (using today's metal prices), 45 % of Scorpio's value is based upon its zinc mineralization, 28 % on its silver mineralization, 18 % from copper, 8 % from lead and 2 % from gold. With only 18 % based upon it's copper mineralization and the rest based on the currently hottest commodities, is it any wonder that SPM continues to rise? Most base metal companies derrive a much higher percentage of their value from copper. So it should not be surprising that SPM continues to rise when other mining companies are currently having a harder go of it.
I will add that since Oct 3rd of this year and including yesterday's selloff in metal stocks that my portfolio which currently holds about 50 % in metal stocks is up exactly 37 %. I see no reason to change what is working well for me.
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