By Gordon Hamilton, Vancouver Sun, December 22, 2010
China's boom spurs 'huge investor interest' in Canadian companies
Prices and demand for Canadian resources are going to keep growing in 2011, fuelled by a "tsunami" of Asian investment dollars flowing into Canada, according to a Scotiabank commodities outlook report.
Scotiabank commodities expert Patricia Mohr said Tuesday that China is not only expected to increase its demand for resources but that a tsunami of investment is headed for the resources sector, particularly smaller Vancouver-based mining companies.
In the commodities outlook, Mohr says two groups: Metals and minerals, and oil and gas, are expected to make some of the biggest gains.
Of the 32 commodities Scotiabank charts, its top five picks for Canadian resources in 2011 are all in the metals and minerals sector -- copper, potash, coking and thermal coal, uranium and palladium, a relatively obscure metal found mostly in Russia and South Africa.
It is used in catalytic converters for automobiles and in electronics.
In an interview, Mohr said Chinese GDP growth is expected to hover at 9.5 per cent in 2011, fuelling demand for resources.
China's next five-year plan, to be released in the spring, is expected to shift growth from export-driven industries to domestic consumers.
Investor interest in Canadian companies, particularly junior-and medium-sized mining companies, is growing by leaps and bounds.
"It is becoming increasing evident to me what huge investor interest there is," she said.
Mohr attended a mining conference in China recently, where she found many of the junior Canadian companies in attendance -- many from Vancouver -- were reporting intense interest from Chinese investors.
"They were all telling me about all the investor interest: Chinese investors being interested in actually buying the company, acquiring the company or else making a big equity investment."
She said in many cases, China is attempting to diversify its commodity supplies. Iron ore is one example, she said, where one of China's largest consumers of iron ore had recently diversified its supply by buying a stake and signing long-term supply agreements with a Canadian producer.
Mohr also said oil and gas demand is expected to remain strong based on demand from China and delays in developing deepwater fields in the U.S. as a result of the Gulf of Mexico oil spill.
She also forecast stronger demand in uranium pricing.
China's target for nuclear energy, which is greenhouse gas-free, is expected to be doubled in the next five-year plan, adding the equivalent of 80 reactors by 2020.
Also Tuesday, the B.C. government issued statistics showing that mining helped pull the province into recovery in 2010.
Minister of State for Mining Randy Hawes released figures showing that B.C. increased its metallurgical coal production by 20 per cent to 28 million tonnes in 2010. The price rose from $120 in 2009 to $210 in 2010. Chinese demand spurred the growth.
Rising metal prices also prompted new investment in B.C. Copper Mountain near Princeton and the New Afton copper-gold mine near Kamloops are both under construction.
Further, the Mount Milligan copper-gold project, also near Kamloops, has been approved.
A further $25 billion of potential new mining projects are in the provincial environmental assessment system.
The "stars are aligning" for British Columbia's mining and resources sector in 2011, Business Council of B.C. president Greg D'Avignon said Tuesday.
D'Avignon said strong demand from Asian economies is expected to fuel growth here, attracting new investment, creating jobs and supporting resource town economies.
He said 2011 growth for the province is being estimated at between 2.6 per cent and 2.8 per cent, beating overall Canadian and U.S. growth.
"British Columbia has a bit of differentiation than the Canadian economy because of its exposure to Asia. Certainly the awareness of Asian investors around the assets and commodities and resources of British Columbia is perhaps higher."
He said the province has diversified its markets by growing exports into Asian economies.
"British Columbia had, like many parts of Canada, been dependent upon to a large extent, exports to the United States. Diversification has allowed us to weather the economic downturn of the last number of years more convincingly than other jurisdictions."
ghamilton@vancouversun.com
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