The View from Canada

The Herrenknecht SBM produces blind shafts with diameters of up to 12 meters and depths of up to 2,000 meters.

“I have an eccentric view on commodities not necessarily shared by my colleagues – or by almost anybody. And that is, we’re running out of everything.” ~Jeremy Grantham

By Catherine Austin Fitts

Our theme tonight on Monday & Markets on the Solari Report is “the view from Canada.”

I am in Toronto for a week to attend the spring convention of the Prospectors and Developers Association of Canada.

I took the opportunity to spend time with Rob Kirby of Kirby Analytics – this weeks interview with Rob on the Exchange Stabilization Fund is an amazing deep dive into the hidden system of finance that is engineering wealth into the top 1%.

Rob hosted a lunch with Solari Report subscribers last Saturday. We had a fascinating roundtable discussion. One topic of interest was what is happening in the precious metals markets.  We were joined by some of the top experts in the world, including Nick Barisheff and members of his team from BMG Bullion.

The presentations at the conference underscore worldwide trends in mining exploration. One of the handouts circulating is from S&P on World Exploration Trends which provides a good overview of what has been happening as commodities prices have fallen.

S&P Global Market Intelligence, “World Exploration Trends,” March 2017

Key Points:

  • Last year marked the fourth consecutive year of declining exploration expenditure. The industry has slashed its budget to approximately one-third of the record high of $21.5 billion allocated in 2012;
  • The 2016 exploration budgets by 1,580 companies totaled $6.89 billion, a year-on-year drop of 21%; and
  • Gold remained the top-explored commodity in 2016

Throughout the presentations, you hear the same themes – companies are having to dig up a lot more rock and dirt to get less metals. This is requiring them to go into more emerging and frontier markets and assume more political risk to do so.

One of the most impressive presentations I saw was from German underground technology company Herrenknecht, whose tunneling tools were used to build the Gotthard Base Tunnel,  on tools and technologies to help address this declining productivity curve.

Some of the drop in industry productivity, no doubt, also comes from the rush of money as precious metals prices peaked in 2011.

Deloitte circulated a piece, Tracking the trends 2017: The top 10 trends mining companies will face in the coming year. Several key points:

  • Mining sector stocks have significantly underperformed the FTSE 100, S&P 500 and ASK 200 since 2014, although they have been gaining since 2016:
  • Mining companies are feeling the heat for greater disclosure and transparency; and
  • Mining companies also have plenty of reasons to worry about cybersecurity.

One of the themes that was evident throughout the presentations, materials and booth presentations was an emphasis on understanding the operating ecosystem and maintaining good relations and communications with workforce and communities. The stress on ESG criteria continues.

If you sit back and appreciate the complexity that the mining industry manages in the face of digging deeper for less, you can appreciate why the interest in space and asteroid mining is growing.  The mining industry needs the human race to become a multi-planetary civilization.  Which raises the question – is it the bankers who are sending us to Mars – or the miners?

Inflation is strong in Canada. The Toronto housing market has risen 20%+ for several years running. Looking through the paper and debt printing, our economics are being driven by a growing population competing for a shrinking supply of bountiful natural resources.

Even in this North America land of plenty, the symptoms of “peak everything” are seeping into all aspects of our lives. Now the question is whether the integration of breakthrough energy technology can offset the decline in our good fortune.

In the meantime, the week closes with this profound “fake news” insight from the ECB’s Mario Draghi, “There is no sign of a convincing upward trend in underlying inflation.”