political risk in mining -- is it gonna get much worse?

[grapejelly]

http://www.reuters.com/article/marke...81106?rpc=401&

What's the story here...with Venezuela nationalizing this mine, offering it to the Russians...

Ecuador isn't being so swell either.

Are the juniors discounting this in their prices? They seem to discount EVERYTHING right now...

But will this become worse?

Typically, in a commodity secular bull, a cyclical bear market (like now) is very bad news for the stability of governments such as Venezuela, and therefore presents extremely heightened risk to miners.

What say you?

[phirang]

Re: political risk in mining -- is it gonna get much worse?

if you understood what was up there, you'd own Rusoro.

[metalman]

Re: political risk in mining -- is it gonna get much worse?

http://www.reuters.com/article/marke...81106?rpc=401&

What's the story here...with Venezuela nationalizing this mine, offering it to the Russians...

Ecuador isn't being so swell either.

Are the juniors discounting this in their prices? They seem to discount EVERYTHING right now...

But will this become worse?

Typically, in a commodity secular bull, a cyclical bear market (like now) is very bad news for the stability of governments such as Venezuela, and therefore presents extremely heightened risk to miners.

What say you?

all the more reason to own the stuff not the stock.

[GRG55]

Re: political risk in mining -- is it gonna get much worse?

http://www.reuters.com/article/marke...81106?rpc=401&

What's the story here...with Venezuela nationalizing this mine, offering it to the Russians...

Ecuador isn't being so swell either.

Are the juniors discounting this in their prices? They seem to discount EVERYTHING right now...

But will this become worse?

Yes.

The ability to access new resources in "politically secure jurisdictions" is even more acute for the base metal miners than it is for the international oil companies.

At this point everyone has been slaughtered, but as the commodity sector recovers [Yes Virginia, there will be a recovery...we hope :p ] jurisdiction political risk will again be priced in.

This applies to everyone, not just juniors; one of the reasons BP remains a habitual underperformer compared to its peers is its excessive exposure to Russia and the Caspian [expect them to do something about this...soon].

Typically, in a commodity secular bull, a cyclical bear market (like now) is very bad news for the stability of governments such as Venezuela, and therefore presents extremely heightened risk to miners.

What say you?

The heightened risk actually comes during the bull phase of the market, as capital is raining down on the sector and assets are bid up to the stratosphere. You'll note all the threatened and actual nationalizations of petroleum assets happened as the oil price and capex expenditures were ramping up. Crystallex and Las Cristinas have been under a cloud for years. Chances are this would never have happened if the gold price was still $300'ish.

[Judas]

Re: political risk in mining -- is it gonna get much worse?

This applies to everyone, not just juniors; one of the reasons BP remains a habitual underperformer compared to its peers is its excessive exposure to Russia and the Caspian [expect them to do something about this...soon].

Like what? Do you mean reducing their exposure to Russian controlled resources, or somehow exerting pressure on the Russians? If the latter, what kind of pressure could possibly spook Putin and his pals? Seizure or impairment of their funds in Western jurisdictions? Depressing the oil price and Russian revenue flows, but with what capacity?

[GRG55]

Re: political risk in mining -- is it gonna get much worse?

Like what? Do you mean reducing their exposure to Russian controlled resources, or somehow exerting pressure on the Russians? If the latter, what kind of pressure could possibly friend Putin and his pals? Seizure or impairment of their funds in Western jurisdictions? Depressing the oil price and Russian revenue flows, but with what capacity?

I would expect a major acquisition in a "politically secure jurisdiction". Natural gas biased within the continental USA, and/or a Canadian oil sands acquisition [Suncor?] would be my guess. Although many talk about an oil price "crash", the fact is these companies have some of the strongest balance sheets and retained cash positions of any sector, anywhere. They will use it, because they don't need credit to do M&A, unlike former darlings like Private Equity companies. And now that all the idiot unhedged hedge funds [sorry, USIPs] and overlevered PE companies are out of the picture, assets are cheap again. Imagine that.

They will actively divert the bulk of the cash they generate in Russia and the Caspian elsewhere. BP now stands for "Beyond Putin". It is the only viable strategy to save the company.