While it might not look like it now, the most investable trend over the next 20 years is going to be in the resource sector, the renewable and non-renewable resources, the minerals, ores, fossil fuels and biomass a wealthier and growing global population is increasingly demanding from finite supplies and already strained production capabilities.

For example:

The metal content of copper ore has been falling since the mid 1990s. A miner now has to dig up an extra 50 percent of ore to get the same amount of copper. As grade drops the amount of rock that must be moved and processed per tonne of produced copper rises dramatically – all the while using more energy that costs several times more than it use to. With the lower grades of ores now being mined energy becomes more and more of a factor when considering economics.

The average grade of gold deposits has been dropping as well.

“We took the nice, simple, easy stuff first from Australia, we took it from the U.S., we went to South America. Now we have to go to the more remote places.” Glencore CEO, Ivan Glasenberg in the Financial Times describing why his firm operates in the Congo and Zambia

Ed Note: Richard Mills entire argument & charts to support the conclusion posted below can be read in its entirety HERE 

Conclusion - Junior’s, An Argument for a Contrarian Investment

Our reality - we’re living on a relatively small planet with a finite amount of reserves and a growing human population.

The world’s major miners are making immense profits but they are having an extremely difficult time replacing reserves let alone growing them. Mining is the story of depleting assets, that asset must be constantly replenished, miners that want to stay in business must replace every pound, oz and gram taken out of the ground.

Juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines - majors do not make discoveries, juniors do, that’s their function in the resource food chain. Junior resource companies already own, and find more of, what the world’s larger mining companies need to replace reserves and grow their asset base.

Junior resource companies - the same ones who today are so oversold and undervalued - are the present owners of the world’s future commodities supply and, most important for investors seeking outsized returns, they act like leveraged exposure (with price gains many times that of the underlying commodity) to the specific commodity(s) investors want exposure to.

Are there a few junior resource companies, with exceptional management teams operating in politically safe jurisdictions, on your radar screen?

If not, maybe there should be.

Richard (Rick) Mills

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www.aheadoftheherd.com

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Mark Spitznagel: The Austrians And The Swan - Birds Of A Different Feather

On Induction: If it looks like a swan, swims like a swan…

By now, everyone knows what a tail is. The concept has become rather ubiquitous, even to many for whom tails were considered inconsequential just over a few years ago. But do we really know one when we see one?

To review, a tail event—or, as it has come to be known, a black swan event—is an extreme event that happens with extreme infrequency (or, better yet, has never yet happened at all). The word “tail” refers to the outermost and relatively thin tail-like appendage of a frequency distribution (or probability density function). Stock market returns offer perhaps the best example: 

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What is a black swan event, or tail event, in the stock market? 

It depends on who’s asking. 

To those familiar with Austrian capital theory, the impending U.S. stock market plunge (of even well 

over 40%)—like pretty much all that came before in the past century—will certainly not be a Black 

Swan, nor even a tail event. 

Nonetheless, the black swan notion is paramount—in perception: Market participants’ failure to 

expect a perfectly expected event—that is, they price in only Anglo swans despite the Viennese bird 

lurking conspicuously in the weeds—much like what is happening today, brings tremendous 

opportunity. 

....read the entire analysis including charts HERE