mining and commodity bull run.....

.....has far to go.
Coulson puts his neck on the line......see below.

Thanks to MineWeb for the following commentary lifted from their current Newsletter:

LONDON (Mineweb.com) -- Commodity prices and mining shares are only pausing for breath and they can be expected to start rising again before long. That was the bullish message from Michael Coulson, chairman of the UK Association of Mining Analysts, in his presentation to the Global Mining Forum.

He dismissed those who suggest that commodity prices have run so far that they are close to boiling over as people who have “chosen to ignore history.”

Gold’s price today was less than half its 1980 peak of $850/oz, he pointed out. Copper at $1.25/lb today compared with a 1988 high of about $2/lb. Nickel, currently at $5.05/lb, reached$10.07/lb in 1988. Aluminium was half its all time peak in that same year and the story was similar for zinc, lead and tin. And, in the case of silver, today’s $6/oz compared with a 1980 high of over $40.

“At the present time metal prices in absolute terms, let alone real inflation adjusted terms, are nowhere near previous peak levels,” Coulson insisted.

China was the key factor driving commodity prices upwards. “Growth [in China] is firing along at a very rapid rate and I believe that trend will last well into next year if not beyond.

“Of course the Chinese Government will take steps to slow growth in order to avoid its economy boiling over, but a lower growth rate still means economic growth and a continuation of the Chinese economy’s rising demand for metals. In due course that growth may slow further and China itself is bound to be encouraged by the strength in commodity prices to expand its own output of raw materials. However, this will all take time and does not alter the situation over the next couple of years.”

And, while China was capturing most of the attention, demand in other Far Eastern economies as well as India and even Russia was also growing. Growth in the English speaking world, particularly the US, was rising satisfactorily and “although these economies are primarily service driven, they remain significant consumers of raw materials.”

Coulson said that, although growth in Continental Europe – the one disappointing area - was sluggish at present, “I think we can say that the outlook for raw material demand, and therefore for metal prices, remains bright well into 2005 – and probably beyond.”

He admitted that some believed the present run up in metals and mining shares would be short lived. These critics looked back at the strong mining markets at the end of the 1980s, the 1993-94 period when diamond discoveries in Canada created considerable interest and the short 1998-99 gold “boomlet” stimulated by the central bank sales agreement. They asked why should the present run in mining shares last any longer.

Coulson said: “Part of the answer relates to the fact that the current run has already lasted longer than those previous runs and suggests a more robust structure to it.

“The other important thing is that those earlier boomlets engaged the interest of experienced mining players, veterans of much earlier booms such as the one in 1978/80, but failed to pull in new investment interest. Without such new players there was only so far that the upturn could go.

“This time it is absolutely clear that the present run in mining shares has attracted the attention and participation of a substantial group of first time players. This broadening of the interest base bodes well for further gains in mining markets after the present consolidation phase in complete.”

He suggested that, before the present metals and mining bull run was over, “we need to see a speculative explosion as a result of a new minerals discovery igniting something akin to the 60s Aussie nickel boom. Where that boom will explode and what the driving metal or mineral will be is a matter of speculation at this stage, but let us have an intelligent guess.”

Russia was certainly worth considering, Coulson suggested, “with gold to the forefront. And that country is likely eventually to be a treasure house of raw materials on a very broad front.” One problem was that not many mineral companies were listed on the Russian stock exchange but “the UK’s AIM market has a growing group of listed mining companies, many of whom are targeting Russia, and here we could find excitement over time.”

Coulson summed up by saying: “My neck’s on the block but I believe that, come the late northern summer, mining shares will be off and running and the smile will have returned to investors’ faces.

“But don’t forget, the boom will end in due course, and if you don’t secure profits along the way you will end up surrendering probably everything you have made.”