Market turnaround looming: PCF MD

A WAVE of investment money looks set to hit gold projects, while Latin America will continue to dominate future exploration spending, PCF Capital managing director Liam Twigger says.

Andrew Duffy
Market turnaround looming: PCF MD

Speaking at Paydirt's Latin America Down Under conference, Twigger said despite the lack of activity investors were starting to eye good-value local mining projects.

“Australia's resources sector presents compelling value at the moment,” he said.

“By any metric the valuations are very low and I think we will see a turnaround.

“I think we're going to see a wave of money move out of the industrials, out of the banks and come into the gold sector.

“People are talking about a five-time uplift in gold stocks and base metals stocks.”

Breaking down where exploration activity was occurring, Twigger said Latin America had historically dominated investment and the trend was set to continue.

He said the quality of assets in the region also attracted higher acquisition prices compared to other parts of the world.

“Regionally, Latin America dominates global exploration expenditure. I think that certainly will continue,” he said.

“It attracts premium pricing for gold. People are prepared to pay almost four times as much for a Latin American gold ounce compared to a gold ounce in Australia or somewhere else.”

Looking at other commodities and other parts of the world, Twigger said China was not interested in investing in magnetite projects outside its current main projects.

He said the Chinese government was focused on CITIC Pacific's development in Western Australia, while the Ansteel and the Karara project and the Extension Hill development were also a focus.

“Until we see those three projects up and running there'll be no more Chinese money for magnetite projects around the world,” he said.

“If you've got a magnetite project and you need billions of dollars in capital I think you should be looking for a joint venture partner, you should be looking to sell it, or be smart like some of the guys in South America looking to sell into the local market using existing infrastructure.”

In terms of other emerging regions, Twigger said the tough market conditions had seen investment money return to safer and more stable jurisdictions.

He said the big loser in these developments had been Africa, while Canada and North America had seen more funds over the last few years.

“As the market contracts people want to invest in countries and areas that are lower risk,” he said.

“We're seeing money return to Australia, money going to projects in Canada and North America.”

Amid this behaviour, investment in Latin America had held steady and Twigger said the region would take on a significant role in the next market turnaround.

“I do believe markets are on the cusp of a major turning point and Latin America will be at the forefront of the rally because of the quality of its assets,” he said.


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