Agoracom Blog

Blackrock Fund – We Are In A Natural Resources “Supercycle”

Posted by AGORACOM at 3:46 PM on Tuesday, July 31st, 2007

While stock markets around the world tremble in the wake of the fallout from the sub-prime loan market, Europe’s #1 ranked natural resources fund managers says you ain’t seen nothing yet.

Evy Hambro manages BlackRock’s $10 billion World Mining Fund and says – despite the gains in natural resources such as gold, copper, nickel and others over the past couple of years – says sky-high metal prices will defy the sceptics for years to come in an interview with the Telegraph.

Likewise, Graham Birch, who oversees the global resources team in BlackRock’s London office stated “the markets are in a commodity super cycle” in an interview with the Int’l Herald Tribune earlier this month.

As you can imagine, Blackrock points to demand out of China and India as a major contributor to rising prices. However, where they differ from most is the call that we are in the very early stages of this bullish cycle and that prices will climb and stay higher for many years to come.

I strongly agree and have stated on several occasions that minerals and metals are the place to be for the very long term. Unlike the bull run in the mid-90’s that was driven primarily by the possibility of repeating Bre-X’s 30,000,000 oz discovery – and crashed when it turned out to be a scam – this run is being fueled by very real demand.

To add fuel to the fire, the severe depression in minerals and metals from 1995 – 2003 meant that veeeerrrrry little money went into exploration. As such, supply is significantly trailing the freight train demand coming out of Asia and other developing regions.

Want more fuel? Despite the billions that are now flooding into exploration in an effort to play catch-up, boring but necessary components of the exploration process can’t keep up and are putting the brakes on any effort to catch up to demand. Specifically, Evy Hambro points to an acute shortage of tires, trucks and power generators.

“Rio Tinto has warned that it is now forced to wait for up to two years for delivery of essentials like power generators which, until recently, were available in half the time. Tires, which used to be delivered within three months, take two years too. The waiting list for grinding mills can be more than three and a half years.”

Throw in the fact that the US Dollar is in free-fall and the real estate market is facing “home price depreciation at levels not seen since the Great Depression” (Conference Call – Countrywide Financial – the largest U.S. mortgage underwriter. July 25th 2007) and it may be more accurate to say we are in the midst of a perfect bullish storm for metals commodities.


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