Mining 2012 opens with a distinct whiff of optimism

THE CONFERENCE CALLER: The Mining 2012 conference in Brisbane was opened with a note of optimism by Patersons Securities research analyst Matthew Trivett.

Addressing the first day audience, Trivett said there were many indicators pointing to positivity and of action on the buy side of the market, especially in the small resource stocks area.

 

“That’s giving us a little bit of optimism,” Trivett said.

“As we are looking forward into 2013 we hope that optimism is carried over and is reflected in a lot of share prices for a lot of these explorers and developers that are still doing a lot of good work on the ground and developing a lot of great projects.”

Trivett gave much of the credit for the recent market resurgence to the discovery of the Nova nickel deposit by Sirius Resources (ASX: SIR).

The Nova discovery, he said, had given real credibility to explorers, who up to then had struggled to gain the attention of the market.

“Before Nova was discovered there was a real occurrence of people out there who would have some fantastic drill results but nothing would happen – the market wouldn’t listen,” he said.

“So it needed something special to come along and change investors’ perspectives.”

Trivett then shifted his focus to take a macro view of what current global goings on were developing as possible market influences

He mentioned the obvious choices of the European Union and the United States, singling out the ‘fiscal cliff’ of the latter’s looming Presidential poll, which may have a lot to do with how the country deals with its debt.

“How these governments respond and the fiscal policies they put in place is going to have a major ramification on actual growth,” Trivett said.

“The IMF has just reduced its growth outlook across the board and I think there is a real chance that growth can be trimmed again.

“Not just in the major, advanced economies in the US and the EU but also India and Indonesia and smaller, more relevant trading partners for Australia.

“We are dependent on these small trading partners, not just China…in our resources sector in general.”

Trivett’s optimism was cautiously supported by LimeStreet Capital managing director Stephen Bartrop.

Bartrop opened his presentation describing the world economy as being bad enough to prompt some policy action.

 

“In the US the recovery continues so there is some increase in confidence there, albeit off a low base,” he said.

“QE3 was the catalyst for some consumer optimism and we have seen that reflected in the markets.”

Bartrop pointed to recovery in China, which he said was occurring with a lower growth trajectory than what we have recently become accustomed to seeing.

This is mainly due to a haemorrhaging of China’s global trade, a wound inflicted by the fact its biggest export market destination, the European Union is currently in a terrible mess.

Recovery in the EU and Europe, he said, is a long way off with no real end in sight.

There is a feeling of increased stabilisation, but nothing is going to be resolved quickly there.

Most analysts have factored in India as a key to unlocking these global woes.

Bartrop didn’t appear to be as convinced saying, “India is getting interesting, but the GDP level is not of a size where it is going to become the ‘next China’.”

“There is no great exciting event on the horizon that is suddenly going to change the world economy.

“It looks like being a long, slow grind out the problems we are in.”

China still appears to be the favourite to bring some form of stability to the global table.

The Chinese Communist Party (CCP) is the world’s largest political party with 80 million members.

It is the most powerful political organisation and it certainly monopolises political and economic power in the world’s largest country.

At the Country’s 18th National Congress on the 18 November, the five year turnover of the Chinese guard will result in the replacement many of the incumbents.

It is also the congress where the ten year leadership change comes into play with current Vice President Xi Jinping tipped to get the nod for the top job.

“China craves stability…if the Chinese economy slumped then the credibility of the Chinese Communist Party would then be called into question,” Bartrop said.

“So there is a huge impetus in China to move that economy along.

“Our expectations are there will be some spending stimulus. They are certainly cautious about inflation and property bubbles

“It will be slow but with potentially positive recovery reforms as well.

“Any stimulus will be positive for commodities.”