It's time to unpack your rock hammers
It is a win-win for the social progress America enjoys when a vigorous private sector can generate the tax revenue to pay for it
Last updated 9/24/2020 at 6:11pm
With the holidays in the rear view mirror and the convention season half-way over, mining operators in Alaska, big and small, are processing their paperwork for the upcoming field season.
The major properties work around the calendar, but when it comes to placer operations and exploration projects, the time for 2018 field season planning is at hand. All the signs are that 2018 will be the best season in five years. Although the stock market is rising steeply, the incremental price of gold is likewise exhibiting a positive trend. Interest rates are also ticking upward. All of this is occurring in an extremely low inflationary context. Although it cannot last, as of now, the national economy is exhibiting good health.
Looking at the price of January gold over the past decade reveals that there was a steep rally from January 2008, where gold opened the year at $846.75 to 2013, where gold started the year at $1,693. The price retreated to $1,082 by January 1, 2016, before starting its comeback to a recent price in the low $1,330s. The soothsayers are saying now, and will continue to predict, gold will be flying to $2,000 per ounce before long.
I have long believed, with innumerable qualifications, that the money supply is relatively fixed; and, therefore, when the equities market is bullish, the price of commodities is destined to be in the bear's den. That is currently not the case. Economics is a complex morass; and it is a well-known rubric that if all the economists in the world were laid end-to-end they would never reach a conclusion. Unlike in the wonderful world of science where we can learn with precision when the world's oceans will lap over the radio antenna on top of the Empire State building, prices of equities and commodities tend to pursue the trail of a drunken sailor. Hence, we cannot predict their future; we can only live with what unfolds.
Despite the economic hardships that bedeviled the mining industry over the past half-decade, due to recent political changes, the near future must seem bright for investors in mining ventures, and by extension, for Alaska's mining industry.
Notably, the federal regulatory burden is being re-evaluated; the State is reviewing some of the regulations pertaining to operations on State land; and for better or for worse the State government, which has been forced onto half-rations, is still stumbling along.
In November, at the Alaska Miners Association (AMA) Convention, the optimism for the upcoming field season was palpable. Major pre-development projects will be pushing ahead. When the American Minerals and Exploration Association met in convention in Reno, the attitude was likewise positive; and the Association for Mineral Exploration convention this week in Vancouver, BC should be nothing less.
The convention season will wind up with the Prospectors and Developers Association of Canada (PDAC) in Toronto and the AMA biennial spring conference in Fairbanks. Those meetings, big and small, will reflect the attitude of the industry. Predictably, it will be all very optimistic.
Of course, one must ponder why the mood seems bullish in every quarter. On the political front, some may argue that it is because POTUS is keeping his promise to make America Great Again. Others are quick to point out that the change in direction of the economy is rarely due to the actions of the incumbent President but those of his predecessor. In the latter case, Mr. Obama ostensibly inherited a sick financial situation from George W. Bush and it took two terms to turn things around; however, ultimately Mr. Trump was afforded the platform upon which to build a revitalized America.
On the other hand, it may be speculated that during the last administration, uncertainty with regard to industrial regulation induced potential investors to sit on their assets until the time for investment ripened; whereupon they literally took their assets out from under the mattress and have begun to wade back into the markets.
The dishoarding premise intuitively makes more sense. While the availability of risk capital is relatively finite, the determination of investors to venture into the marketplace is subjective. It is realistic to infer that optimism about mining ventures is tied to a sense that the political climate will engender fruitful returns.
A Danish proverb (sometimes erroneously attributed to Yogi Berra) says that "making predictions is very hard especially when you are talking about the future". As difficult as accurate predictions may be, general optimism tends to be contagious.
It is not just the American market that is doing well. Investors around the world are logging paper gains. If the rising tide lifts all the boats, that can only mean good things for everyone. Perhaps our fearless leader will not just restore our national "greatness," but will generate good things for our international friends and neighbors.
In any case I, for one, am looking forward to a prosperous New Year for Alaska's mining industry, and wish the best to all of you.