SIZINGUPTHESIZINGUPTHESIZING UP THE SIZING UP THE SUPERCYCLESUPERCYCLESUPERCYCLESUPERCYCLE

Frik Els | MINING com | @frikelsFrik Els | MINING.com | @frikels

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

“The meek shall inherit“The meek shall inheritThe meek shall inherit The meek shall inherit the earth, but not thethe earth, but not thethe earth, but not the the earth, but not the mineral rights.”mineral rights.”

‐‐ J Paul Getty J Paul Getty 

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

18501850 2014 B b d b bbl2014 B b d b bbl•• 1850 1850 –– 2014: Booms, busts and bubbles2014: Booms, busts and bubbles

•• PPaper markets: Financialization of commodities

• China: Misunderestimating its impact

• Global risk profile:Global risk profile:Role of non‐traditional players,social media, transparencysocial media,  transparency

• Headlines and trends to 2020

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

Taking Taking thetheggLLoooooooooooooooooonnggoooooooooooooooooo gg

viewview1850 2014

viewview

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

ItIt ldld bbIt It could could be be worse, worse, you could beyou could beyou could be you could be farming…farming…farming…farming…

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

YOU ARE HEREYOU ARE HEREOUOU

UNTOUCHEDBYMIDASUNTOUCHEDBYMIDASUNTOUCHED BY MIDAS UNTOUCHED BY MIDAS “II don’t think anybody has a verydon’t think anybody has a veryI I don t think anybody has a very don t think anybody has a very good model of what makes gold good model of what makes gold 

prices go up or downprices go up or down ””prices go up or downprices go up or down.  .  ‐ Janet Yellen

""Nobody really understandsNobody really understands gold gold ii d I d 'td I d 't t d tt d tpricesprices and I don'tand I don't pretend to pretend to understandunderstand them either." them either." 

B B k‐ Ben Bernanke

PAPERBEATSROCKPAPERBEATSROCKPAPER BEATS ROCKPAPER BEATS ROCK

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

“Participating “Participating in a price in a price movement is not the movement is not the same as owning an same as owning an ggassetasset.”  .”  

‐‐ Tony Tony DedenDedenyyEdelweiss FundEdelweiss Fund

THEWAVEOFTHEFUTURESTHEWAVEOFTHEFUTURESTHE WAVE OF THE FUTURESTHE WAVE OF THE FUTURES

$ billions flowing into$ billions flowing into commodities

CFTC, Growmark

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLE

““F d llF d ll ii

SIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

““Fundamentally copper Fundamentally copper is is tight anywaytight anyway, add , add an an ETF ETF 

hh dd ii bbto to that that and and it it becomes becomes explosiveexplosive.” .” 

‐ David Thurtell ,Citigroup

WHAT THE ETF?WHAT THE ETF?WHAT  THE  ETF?WHAT  THE  ETF?

GOFORTHEGAPMYCHINAGOFORTHEGAPMYCHINAGO FOR THE GAP MY CHINAGO FOR THE GAP MY CHINA

China needs to China needs to learn from the learn from the world and the world and the world needs to world needs to l fl f hihilearn from learn from ChinaChina

‐‐ Xi Xi JinpingJinping

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

What would youWhat would youWhat would you What would you like tolike to

hear first? hear first? • \

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

2010 China Credit / Credit2010 China Credit / Credit Equals Gold #1 Collective Trust Product

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLE# of # of legal entities involved legal entities involved 

SIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

in mining:in mining:

105 490105 490105,490 105,490 # of # of legal entities involved legal entities involved i l di l din culture, sports and in culture, sports and entertainment:entertainment:

102,775102,775l fl f hh–– National Bureau of Statistics National Bureau of Statistics ChinaChina

SLOWBOATTOCHINASLOWBOATTOCHINA1 Switzerland

SLOW BOAT TO CHINASLOW BOAT TO CHINA1 Switzerland2 South Africas3 P ki3 Pakistans4 New Zealands5 Hungarys

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

China’s coal imports China’s coal imports 

=== = 

3 54%3 54%3.54%3.54%of global of global productionproduction

‐‐ IEA 2012IEA 2012‐‐ IEA 2012IEA 2012

USA!USA!USA!USA!USA!USA!USA!USA!USA! USA! USA! USA!USA! USA! USA! USA!

Impact of country economic activity shocks  on commodity prices

Source: IMF 2012

SIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

– World Bank, Growmark

2020VISION2020VISION2020 VISION2020 VISION

7 – “The $1 billion tweet. How 140 characters destroyed a gold mine”characters destroyed a gold mine

20202020VISIONVISION2020 2020 VISION VISION 

6 – “Metal prices spike over supplyspike over supply worries after rebels capture massivecapture massive Sub‐Sahara mining complex”complex”

20202020VISIONVISION2020 2020 VISION VISION 

5 – “After years of wrestling withwrestling with mining challenges, Mongolia cracks topMongolia cracks top 10 best investment destinations”destinations

2020VISION2020VISION2020 VISION 2020 VISION 

4 4 –– “North Korea builds world’s “North Korea builds world’s l t th i ”l t th i ”largest rare earth mine.” largest rare earth mine.” 

2020VISION2020VISION2020 VISION2020 VISION

3 3 –– “Vacationing “Vacationing billionaire financierbillionaire financier3 3 –– “Vacationing “Vacationing billionaire financierbillionaire financierbillionaire financier billionaire financier arrested under new arrested under new antianti corruptioncorruption

billionaire financier billionaire financier arrested under new arrested under new antianti corruptioncorruptionantianti‐‐corruption, corruption, transparency transparency legislation”legislation”

antianti‐‐corruption, corruption, transparency transparency legislation”legislation”legislation”legislation”legislation”legislation”

2020VISION2020VISION2020 VISION 2020 VISION 

2 2 –– “Back to the salt “Back to the salt mines: Price recoversmines: Price recovers2 2 –– “Back to the salt “Back to the salt mines: Price recoversmines: Price recoversmines:  Price recovers mines:  Price recovers after potash after potash potentates stitchpotentates stitch‐‐upup

mines:  Price recovers mines:  Price recovers after potash after potash potentates stitchpotentates stitch‐‐upuppotentates stitchpotentates stitch up up deal”deal”potentates stitchpotentates stitch up up deal”deal”

SIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

1 – “Fanyan corners bismuth market causing widespread panic among blusher users”

SIZINGUPTHESUPERCYCLESIZINGUPTHESUPERCYCLESIZING UP THE SUPERCYCLESIZING UP THE SUPERCYCLE

Q & AQ & A

Frik Els | MINING.com | @frikels