What a year it's been for mining stocks and metals. Shares such as Teck Resources, First Quantum and Quadra Mining have quadrupled since the start of 2009. Copper HG-FT prices have almost doubled, and the S&P/TSX Materials Index is up 25 per cent.
Many investors are wondering whether this is just the start of the rally that accompanies economic recovery -- or whether it will all end in tears. What's the best way to play the sector? Which stocks are still not worth touching? Where do you put your money?
You can bounce your questions off David Whetham, who runs the Scotia Resource fund and the Scotia Canadian Small Cap fund. He'll be taking our readers' questions in an online discussion at noon on Friday, August 28th, but you can get a jump on the queue by submitting your question here.
David Whetham, Scotia Cassels
Mr. Whetham began his investment career in 1990 as an equity analyst with Confederation Life, where he developed a background in fundamental company analysis as well as a disciplined approach to equity valuation. He continued his career managing Canadian equities at several money management firms before joining Scotia Cassels in 2000 as a member of the Canadian equity team. He has managed the Scotia Resource fund since 2000, and the Scotia Canadian Small Cap fund since 2004.
He has a Bachelor of Business Administration degree from Wilfrid Laurier University as well as an MBA from the University of Toronto. He also holds the Chartered Financial Analyst designation and is a member of the Toronto CFA Society.
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Sonali Verma, Globe Investor: Hello, everyone, thanks for joining us! And what better way to wrap up the week than by talking mining with David Whetham... Thanks for giving us so much of your time, David. Let's get to our readers' questions.
Ken Yurchuk writes: Mr. Whetham, It seems to me the current rally in mining stocks is just a little frothy. It has been highly dependent of the health of the Chinese economy, which, while continuing to grow, has slowed to mid single digit growth. Do you feel that the Materials rally is a little premature? I think the US economy has to turn around more substantively before this kind of growth will be supported.
David Whetham: I agree. Much of the demand we have seen for many commodities has come from China, and I question how sustainable it is in the short term. Chinese demand has included inventory restocking, some speculative demand, and some demand from the government stimulus spending. All three of those factors are not sustainable, so there is potential for short term weakness until the western economies (specifically the U.S.) show stronger demand.
Don McAlpine writes from Elliot Lake, ON: Teck Resources, First Quantum and Quadra Mining all appear to be primarily involved in foreign activities. They are also relying upon the commodity market for their revenues.
Given that China, a major consumer of resources and appears to be intent upon avoiding the commodities market through acquisition and loans to resource based corporations thus securing supply directly. What is the long-term stability of the commodities market?
