Natural Resources: The New "Gold"?

I was happy to speak recently at the Vancouver Natural Resources Conference in beautiful British Columbia. I also had the pleasure of listening to a variety of presentations by some of the most influential names in the investment world, and met a few new faces along the way.

Here is what I took away from this year’s visit to Vancouver:

1) London’s dirty little secret. My good friend Robert Friedland, executive chairman and founder of Ivanhoe Mines, painted a startling picture of an increasingly polluted London, England, during his speech. Did you know the city’s air pollution is now worse than Beijing’s? Not only that, Paris hit life-threatening pollution levels this year and the World Health Organization even stated that pollution is the world’s single-biggest environmental health risk. Hard to believe, isn’t it?
Friedland says the answer to healthier air is the “new gold,” or platinum group metals (PGMs).

By using PGMs in catalytic convertors, harmful diesel emissions can be better controlled and less carbon monoxide is produced. As urbanization continues, investors should remain aware of inevitable pollution in larger cities, and in turn, that the use of PGMs will help minimize these effects. Demand should rise as supply lowers, pushing the metals’ prices higher.

Earlier this year I wrote that platinum and palladium looked very compelling, and the metals continue to be relevant in both the auto industry and medical industry. 

2) Russia is America’s biggest problem, according to Marin Katusa of Casey Research. Not only does Russia produce more oil and natural gas than any other country, it’s also exerting control over the uranium sector. America has long been the number one consumer of uranium, and at one time was the largest producer, but that’s all changing. The American uranium stockpile has been reduced to an amount that will last roughly three more years.

The U.S. Department of Energy (DOE) used to release a certain amount of uranium into the market each year, but in 2013 the DOE began dumping what little uranium the U.S. does have and selling it to the spot market at a lower cost. President Barack Obama did this in order to raise enough money to pay for previous cleanups.

There isn’t enough uranium left to fulfill our needs if you compare the amount the U.S. produces with the amount the U.S. requires. It’s not only America. Much of the world is looking for sources of uranium to meet demand factors. The World Nuclear Organization shows in the chart below that one reason for the shortfall in uranium supply from mines is that early production went straight into military inventories and civil stockpiles.

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Disclosure: All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Fund portfolios are actively managed, and holdings may change daily. Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more of U.S. Global Investors Funds as of 06/30/2014:  Ivanhoe Mines Ltd.

Written By: Frank Holmes