Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The Northern Miner’s Global Mining Symposium virtual conference this week – the second one this year – was another resounding success, with thousands of viewers tuning in from around the world to hear the views of some of the industry’s leading visionaries and entrepreneurs.
From Haywood Securities co-founder and Canadian Mining Hall of Fame inductee David Elliott to Rob McEwen of McEwen Mining and Serafino Iacono of Gran Colombia Gold, the two-day conference offered unparalleled insight into the current state of the global economy and how it is impacting metals and mining.
One of the most widely anticipated sessions was the discussion Northern Miner group publisher Anthony Vaccaro had with David Rosenberg, president, and chief economist and strategist of Rosenberg Research & Associates, an economic consulting firm he set up in January 2020.
Between 2002 and 2009, while chief North American economist at Merrill Lynch in New York, the University of Toronto educated economist was consistently ranked in the Institutional Investor All-Star analyst rankings, and prior to setting up Rosenberg Research, he was chief economist and strategist at Gluskin Sheff + Associates from 2009 until 2019.
Rosenberg forecast China’s economic growth is going to be at least 6% to 7%, as the U.S. will struggle with growth of 1-2%
The Financial Post Magazine has ranked Rosenberg one of the five most influential Canadians in investing, while Business Insider has named him one of the twelve smartest people on Wall Street and Canadian Business Magazine described him as one of Canada’s 25 most powerful business people.
In addition to his views on how governments and central banks have responded to the current economic crisis with unprecedented measures (that make the financial crisis of 2008 and 2009 seem like “QE light”), and how this is positive for gold, Rosenberg talked about his takeaways from the U.S. presidential election and his views on China and the outlook for base metals. (You can listen to the full conversation on the Northern Miner’s website).
On U.S. President Donald Trump’s defeat by rival Joseph R. Biden Jr., Rosenberg said what was interesting was not that Trump lost, but that he received as many votes as he did: a resounding 72 million. “To me, the big headline on the election wasn’t that Trump lost, although he’s fighting it hard, it’s how did we not have a democratic landslide,” he told Vaccaro.
“All we heard about was the Blue Wave. We didn’t get a Blue Wave.” He also pointed to the decrease in the Democrat’s majority in the House. “It looks like it could be at least ten seats and that hardly ever happens with a president being elected from the same party, so there is a real message here that the country seems to want to go center-center-right.” In essence, he concluded, “this was a vote against tax increases.”
Turning to China and its handling of the coronavirus, Rosenberg pointed out that the country was the first economy to come out of the pandemic and it remains the world’s fastest-growing economy.
Rosenberg said the U.S., and the rest of the Western world for that matter, will have to deal with China’s rising power and influence
“It’s the irony of ironies that the epicenter of the pandemic was China and they are the first ones out of it. Of course, they beat the pandemic. They didn’t need a vaccine, they just basically needed a totalitarian state and say: “You leave your house, you’re dead!”
But it’s more than that. Chinese policy makers “never blew their brains out on fiscal policy to get their economy going and they never blew their brains out on monetary policy to keep their economy moving. They just basically shut down their economy and then we saw what happened.”
Rosenberg forecast China’s economic growth is going to be at least 6% to 7%, as the U.S. will struggle with growth of 1-2%, or perhaps even lower, and the Asian juggernaut’s economic strength means that the bull market for base metals “probably remains intact.”
“The base metals, in general, are correlated mostly to the Chinese economy, and so I would say the base metals have had a very nice run,” he said. “The link between Chinese GDP and commodities is incredible … It’s not difficult for me to have a constructive stance towards the base metals sector when I have the view that they are the primary source of demand globally, considering that China consumes half of the world’s metals.”
He also pointed out that one of the things to remember about China is that it has enjoyed tremendous labour productivity growth – the fastest in the world – which puts it in good shape.
“As we were engaging in financial engineering the past ten years in North America to goose earnings per share, China was ramping up their productivity, and it’s paying off right now on an accelerating supply-side growth.”
Looking ahead, Rosenberg said the U.S., and the rest of the Western world for that matter, will have to deal with China’s rising power and influence. “I hate to say it, but this was going to be a big problem for whoever the president was going to be – China’s accelerating ascendancy – as far as capturing more and more share of global GDP. It is something that we’ve got to keep an eye on.”
(This article first appeared in The Northern Miner)
