March/April 2014

Editor's letter

Trends and timelines

By Ryan Bergen

Ryan BergenBy David Harquail’s count, in just the last dozen years, a series of short-term investment trends have arisen, had their moment, and then in two or three years declined, replaced by the next new idea. Generating free cash flow is currently en vogue, the Franco-Nevada CEO told a crowd gathered at the recent PDAC Convention in Toronto.

Based on Harquail’s observed rate of investment trend turnover, another 20 or so will have been picked up and abandoned over the projected 55-year life of the Legacy potash mine, which we profile in our special report on Saskatchewan (p. 62). The $4.1-billion project represents just one long-term investment in the commodity by two new players – K+S Potash Canada and BHP Billiton – as well as established producers that have already been drawing potash from the Prairie Evaporite Formation for more than 50 years.

Another example proving that long-term projects can be accomplished despite investor unpredictability and short-term thinking is Cameco Corporation’s Cigar Lake uranium mine. After decades in development, the mine began producing ore in mid-March and will add 18 million pounds to the company’s annual output once fully ramped up.

For short-term investors putting money into mining companies, the value of the actual projects the miners have and the extent of their risks, Harquail explained, is often beside the point. To succeed, he advised that instead of compromising their projects for short-term gain, companies should try to find investors such as sovereign wealth funds and pension funds with long-term goals that want to “get rich slow.”

Market forces have squeezed the fertilizer and uranium sectors, resulting in layoffs and stalled projects. Developers of potash and uranium, however, have the fundamentals on their side, and, if disciplined, should be very attractive to the kind of long-term investor that Harquail says is out there. We will just need the patience to wait to see.

Ryan Bergen

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