Is The Nuclear Winter In Base Metals Here?
I always read what the bears had to say, even when I was highly bullish. I first read Frank Veneroso's stuff almost two years ago, The Nuclear Winter in Base Metals. At the time it did not seem realistic, but it cautioned me to keep my eyes open. I met Mr Veneroso at an investment conference in January of 2007 and I was priviledge to listen to his views on different markets and to assess the data that he was presenting.
Within months it seemed that some of the signs he was suggesting were a problem were indeed a big problem.
Well, look at the prices of base metals today, copper in the range of half of its peak, nickel around 25% of its peak, zinc around 25% of its peak... I track prices on Kitco.
All down and an utter disaster for the earnings report of all of the entire mining industry. Indeed, at these prices there will be mining developments cancelled and mines going out of business.
Any gold stock that reports "gold equivalents" is also going to be a disaster. The degree of dependence on base metal revenues for some of these companies is enormous. Some were barely paying costs with base metal cash credits and will not be losing money. Goldcorp is one I like to pick on because it is so absurdly priced. At one point 64% of its revenue was from copper.(Q2/06) Well, the executives have long ago cashed out...
With these prices quarter 4 earnings will indeed be dire.