Australia's Boutique Resource Investment Firm
MPS MAR TIN PLACE SECURITIES
Australia’s Boutique Resource Investment Firm
1
Australia Day
MPS MAR TIN PLACE SECURITIES
Mines and Money London 30 November 2009
An Outlook for Australian Resources Barry Dawes B Sc FAusIMM(CP) MSDIA MSEG
Managing Director
Martin Place Securities
Disclaimer
MPS MAR TIN PLACE SECURITIES
Nothing in this presentation shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. In preparing this research, MPS did not take into account the investment objectives, financial situation and particular needs of the reader. Before making an investment decision on the basis of this presentation, the reader needs to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances. This presentation is based on information obtained from sources believed to be reliable but MPS does not make any representation or warranty that it is accurate, complete or up to date. MPS accepts no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice and accurately reflect the views of MPS at the time of writing. This presentation has originated from MPS (ABN 30 094 927 947), a licensed securities dealer (AFS Licence 247 404). MPS can gain income through brokerage, capital raising commissions and corporate advisory fees.
The Australian Opportunity • • • • • • •
Resources export revenues rising again A$ strong against most currencies Resources sector investment rising Commodity demand firm Economic growth resumed Resource sector equities still cheap Exploration success opportunities
MPS MAR TIN PLACE SECURITIES
MPS MAR TIN PLACE SECURITIES
Positive Outlook for Resources • • • • • •
Global monetary and fiscal stimulus Large low interest rate cash deposits China and other BRIIC growing Gold reacquiring reserve status Breakdown of US$ and T bond markets Commodities still have supply issues
Drivers of Equity Markets
BCA 2009
MPS MAR TIN PLACE SECURITIES
Gold Outlook Dominating • • • • • •
MPS MAR TIN PLACE SECURITIES
Gold price drives Australian Resources Gold in powerful bull market Gold Sector upturn underway Mine supply falling while demand soars Worldwide monetary stimulus accelerating Significant upside in precious metals
Oil Price 1998-2009 (US$/bbl)
MPS MAR TIN PLACE SECURITIES
Source: IRESS
MPS MAR TIN PLACE SECURITIES
Copper 1977-2009 (US$/lb Comex)
Source: IRESS
MPS MAR TIN PLACE SECURITIES
BHP – Resources Sector Proxy
Source: IRESS
MPS MAR TIN PLACE SECURITIES
Shanghai (SSE) Composite 1990-2009
Source :The Chart Store
All Ordinaries Index
MPS MAR TIN PLACE SECURITIES
Source: IRESS
China leading the way • • • • • •
Major Fiscal stimulus Population migration is major driver Basic industries still growing Crude steel production still rising Aggressively acquiring global resources Gold reserves 1054t (up 75% since 2003)
MPS MAR TIN PLACE SECURITIES
US and China Crude Steel
MPS MAR TIN PLACE SECURITIES
Mt p.a. 700
600
500
400
300
200
100
0 Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Source: IISI
World Crude Steel (mmt)
MPS MAR TIN PLACE SECURITIES
Source: Laplace Conseil
Opportunity of Proximity
MPS MAR TIN PLACE SECURITIES
Source: Austrade
MPS MAR TIN PLACE SECURITIES
Australian Resource Exports (A$m) 160,000 140,000 120,000 100,000
Gold Thermal Coal Coking Coal
80,000 60,000 40,000
Iron Ore & Products Petroleum** Al Ore & Products Base Metals*
20,000 0
Source: ABARE
Energy Security Issues • • • • • •
Electricity demand growing Energy sources stretched Peak Oil limiting production Energy security major political issue Nuclear energy underpinning uranium Australian oil exploration to boom
MPS MAR TIN PLACE SECURITIES
MPS MAR TIN PLACE SECURITIES
Energy Consumption by Fuel type Hydro 100% 90%
6% 6%
8%
Nuclear
Coal
Gas 6%
6% 6%
Oil 8%
12% 28%
80% 70%
29%
24%
19%
38%
47%
24% 51%
60% 50%
70% 25% 24%
37%
5%
22%
16%
14%
40%
16%
30% 20%
36%
44%
40% 31%
35%
10%
3%
51%
46% 23%
20%
0% World
USA
Euro ex FRA
France
Japan
China
Latin A
BRIC
M.East
Peak Oil Issues
Source: APSO
MPS MAR TIN PLACE SECURITIES
Gold Outlook • • • • • •
Gold re acquiring reserve status Great concerns over fiat currency US$ and US T-bonds at risk Gold in powerful global bull market Major upside adjustment in gold equities Other precious metals strengthening
MPS MAR TIN PLACE SECURITIES
US$ Gold Price 1979-2009
MPS MAR TIN PLACE SECURITIES
(US$/oz)
Source: IRESS
MPS MAR TIN PLACE SECURITIES
The Long View on US T-Bond Yields 16 1981-2009 28 Yrs falling yields
1942 -1981 39 Yrs rising bond yields 14
Deflation 12
10 Inflation 8
6 Disinflation
4
2 Reflation 0 1940
1944
1949
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Source: IRESS MPS
MPS MAR TIN PLACE SECURITIES
Long Term US $ Index 1969-2009
Source :The Chart Store
Long Term US$ Broad Index
Source :The Chart Store
MPS MAR TIN PLACE SECURITIES
A$ vs US$ 1970 - 2009
MPS MAR TIN PLACE SECURITIES
Source: Thechartstore.com
0.30 Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
AUD:GBP
A$ vs GBP 1983 - 2009
MPS MAR TIN PLACE SECURITIES
0.80
0.75
0.70
0.65
0.60
0.55
0.50
0.45
0.40
0.35
Source: RBA
US Gold Index (XAU)
MPS MAR TIN PLACE SECURITIES
Source: IRESS
MPS MAR TIN PLACE SECURITIES
XAU vs US Gold Price 1987-2009
Source: IRESS
MPS MAR TIN PLACE SECURITIES
Long Term US Gold Index (S&P Gold)
Source: EC De Groot
MPS
A$ vs XAU
MAR TIN PLACE SECURITIES
300
150 140
250
A$/US$
130 120
200
110 150
100 90
100
XAU
80
50 Jan-93
70 Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
MPS MAR TIN PLACE SECURITIES
Australian Gold Production History 350 Av. Decline -1.9% 1997-2008
(tonnes)
300
250
200
150 Av. Growth 6.2% 1960-1997
100
50
0 1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011F
Source: ABARE
Conclusions • • • • • • •
MPS MAR TIN PLACE SECURITIES
Gold suggests inflation ahead World monetary inflationary pressures continuing Resources stocks heavily discounted Institutional investors underweight gold/resources Energy prices to remain firm on supply worries Exploration successes to drive market The `Optimism’ leg now underway
MPS MAR TIN PLACE SECURITIES
Idealised Elliot Wave Market Psychology Euphoria
Ill based Rally Optimism False OpportunityOpportunity Disbelief
Pessimism
Pessimism
Source: MPS
Portfolio Recommendations • • • •
Key leaders – BHP WPL NCM LGL Overweight Gold Sector Mid caps IGO KZL MCR Uraniums • ERA PDN AGS
• Explorers/Developers • Gold GOA IGR CRK • Copper CDU CLY ERM TRM • Exotics ORE ARU LYC ALK
MPS MAR TIN PLACE SECURITIES
Australia’s Boutique Resource Investment Firm
1
Australia Day
MPS MAR TIN PLACE SECURITIES
Mines and Money London 30 November 2009
An Outlook for Australian Resources Barry Dawes B Sc FAusIMM(CP) MSDIA MSEG
Managing Director
Martin Place Securities
Disclaimer
MPS MAR TIN PLACE SECURITIES
Nothing in this presentation shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. In preparing this research, MPS did not take into account the investment objectives, financial situation and particular needs of the reader. Before making an investment decision on the basis of this presentation, the reader needs to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances. This presentation is based on information obtained from sources believed to be reliable but MPS does not make any representation or warranty that it is accurate, complete or up to date. MPS accepts no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice and accurately reflect the views of MPS at the time of writing. This presentation has originated from MPS (ABN 30 094 927 947), a licensed securities dealer (AFS Licence 247 404). MPS can gain income through brokerage, capital raising commissions and corporate advisory fees.
The Australian Opportunity • • • • • • •
Resources export revenues rising again A$ strong against most currencies Resources sector investment rising Commodity demand firm Economic growth resumed Resource sector equities still cheap Exploration success opportunities
MPS MAR TIN PLACE SECURITIES
MPS MAR TIN PLACE SECURITIES
Positive Outlook for Resources • • • • • •
Global monetary and fiscal stimulus Large low interest rate cash deposits China and other BRIIC growing Gold reacquiring reserve status Breakdown of US$ and T bond markets Commodities still have supply issues
Drivers of Equity Markets
BCA 2009
MPS MAR TIN PLACE SECURITIES
Gold Outlook Dominating • • • • • •
MPS MAR TIN PLACE SECURITIES
Gold price drives Australian Resources Gold in powerful bull market Gold Sector upturn underway Mine supply falling while demand soars Worldwide monetary stimulus accelerating Significant upside in precious metals
Oil Price 1998-2009 (US$/bbl)
MPS MAR TIN PLACE SECURITIES
Source: IRESS
MPS MAR TIN PLACE SECURITIES
Copper 1977-2009 (US$/lb Comex)
Source: IRESS
MPS MAR TIN PLACE SECURITIES
BHP – Resources Sector Proxy
Source: IRESS
MPS MAR TIN PLACE SECURITIES
Shanghai (SSE) Composite 1990-2009
Source :The Chart Store
All Ordinaries Index
MPS MAR TIN PLACE SECURITIES
Source: IRESS
China leading the way • • • • • •
Major Fiscal stimulus Population migration is major driver Basic industries still growing Crude steel production still rising Aggressively acquiring global resources Gold reserves 1054t (up 75% since 2003)
MPS MAR TIN PLACE SECURITIES
US and China Crude Steel
MPS MAR TIN PLACE SECURITIES
Mt p.a. 700
600
500
400
300
200
100
0 Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Source: IISI
World Crude Steel (mmt)
MPS MAR TIN PLACE SECURITIES
Source: Laplace Conseil
Opportunity of Proximity
MPS MAR TIN PLACE SECURITIES
Source: Austrade
MPS MAR TIN PLACE SECURITIES
Australian Resource Exports (A$m) 160,000 140,000 120,000 100,000
Gold Thermal Coal Coking Coal
80,000 60,000 40,000
Iron Ore & Products Petroleum** Al Ore & Products Base Metals*
20,000 0
Source: ABARE
Energy Security Issues • • • • • •
Electricity demand growing Energy sources stretched Peak Oil limiting production Energy security major political issue Nuclear energy underpinning uranium Australian oil exploration to boom
MPS MAR TIN PLACE SECURITIES
MPS MAR TIN PLACE SECURITIES
Energy Consumption by Fuel type Hydro 100% 90%
6% 6%
8%
Nuclear
Coal
Gas 6%
6% 6%
Oil 8%
12% 28%
80% 70%
29%
24%
19%
38%
47%
24% 51%
60% 50%
70% 25% 24%
37%
5%
22%
16%
14%
40%
16%
30% 20%
36%
44%
40% 31%
35%
10%
3%
51%
46% 23%
20%
0% World
USA
Euro ex FRA
France
Japan
China
Latin A
BRIC
M.East
Peak Oil Issues
Source: APSO
MPS MAR TIN PLACE SECURITIES
Gold Outlook • • • • • •
Gold re acquiring reserve status Great concerns over fiat currency US$ and US T-bonds at risk Gold in powerful global bull market Major upside adjustment in gold equities Other precious metals strengthening
MPS MAR TIN PLACE SECURITIES
US$ Gold Price 1979-2009
MPS MAR TIN PLACE SECURITIES
(US$/oz)
Source: IRESS
MPS MAR TIN PLACE SECURITIES
The Long View on US T-Bond Yields 16 1981-2009 28 Yrs falling yields
1942 -1981 39 Yrs rising bond yields 14
Deflation 12
10 Inflation 8
6 Disinflation
4
2 Reflation 0 1940
1944
1949
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Source: IRESS MPS
MPS MAR TIN PLACE SECURITIES
Long Term US $ Index 1969-2009
Source :The Chart Store
Long Term US$ Broad Index
Source :The Chart Store
MPS MAR TIN PLACE SECURITIES
A$ vs US$ 1970 - 2009
MPS MAR TIN PLACE SECURITIES
Source: Thechartstore.com
0.30 Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
Dec-…
AUD:GBP
A$ vs GBP 1983 - 2009
MPS MAR TIN PLACE SECURITIES
0.80
0.75
0.70
0.65
0.60
0.55
0.50
0.45
0.40
0.35
Source: RBA
US Gold Index (XAU)
MPS MAR TIN PLACE SECURITIES
Source: IRESS
MPS MAR TIN PLACE SECURITIES
XAU vs US Gold Price 1987-2009
Source: IRESS
MPS MAR TIN PLACE SECURITIES
Long Term US Gold Index (S&P Gold)
Source: EC De Groot
MPS
A$ vs XAU
MAR TIN PLACE SECURITIES
300
150 140
250
A$/US$
130 120
200
110 150
100 90
100
XAU
80
50 Jan-93
70 Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
MPS MAR TIN PLACE SECURITIES
Australian Gold Production History 350 Av. Decline -1.9% 1997-2008
(tonnes)
300
250
200
150 Av. Growth 6.2% 1960-1997
100
50
0 1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011F
Source: ABARE
Conclusions • • • • • • •
MPS MAR TIN PLACE SECURITIES
Gold suggests inflation ahead World monetary inflationary pressures continuing Resources stocks heavily discounted Institutional investors underweight gold/resources Energy prices to remain firm on supply worries Exploration successes to drive market The `Optimism’ leg now underway
MPS MAR TIN PLACE SECURITIES
Idealised Elliot Wave Market Psychology Euphoria
Ill based Rally Optimism False OpportunityOpportunity Disbelief
Pessimism
Pessimism
Source: MPS
Portfolio Recommendations • • • •
Key leaders – BHP WPL NCM LGL Overweight Gold Sector Mid caps IGO KZL MCR Uraniums • ERA PDN AGS
• Explorers/Developers • Gold GOA IGR CRK • Copper CDU CLY ERM TRM • Exotics ORE ARU LYC ALK
MPS MAR TIN PLACE SECURITIES
