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Mining outlook is warm and sunny

After two days in Cape Town attending the 121 Mining Investment Conference Director Andrew Rowell discusses the outlook for the mining sector.

 

What impact does the natural environment have on mining investment decisions?

Judging by the reception to miners and explorers at the 121 Mining Investment conference this week in Cape Town, a natural environment of warm weather and beautiful views is extremely favourable to the sector.

With 63 companies signed up for effectively a reverse roadshow to more than 250 investors and fund managers, the 121 conference provides an efficient way for meeting investors and getting deals done. For UK fund managers, brokers and analysts, it also provides a way of escaping the bleak weather at home.

And this year, deals are definitely being done.

When we wrote last year that the positive mood was starting to translate into share price gains, the meetings were generally cordial with plans to keep in touch and provide regular updates over the course of the year.

Step forward 12 months and with a bag of commodities all doing well, the meetings took on a more serious note. Investors were openly asking for placement timetables and follow up meetings the next day. Research analysts were requesting site visits on the promise of coverage in the near term.

Compared to the previous boom, the mood appears more measured. Retail money is starting to slowly flow back in, probably at the expense of private equity, which used its market power as a blunt weapon in a depressed environment. However, there doesn’t appear to be a bubble mentality or rush to a particular commodity.

Interestingly, just about every panel session raised the issue of Trump and his impact on the resources sector and the markets in general. All of the panellists saw volatility as being positive in the short term. However, they warned the unpredictability of his decisions was likely to cause big issues down the track.

The 121 series has expanded to London, Hong Kong and New York over the past few years. If only they could find a way to bottle the Cape Town weather and beauty and replicate it elsewhere, the happiness and general confidence could continue year round.