Rick Rule, president and CEO, Rule Investment Media
FOCUS: Natural resource stocksCommodity markets continue to be strong, while commodity-related equities are not enjoying the same strength. The little bit of generalist buying coming into the resource sector is coming into higher quality names, with much of the remaining equities liquidity being supplied by index buyers.
Overall junior equity markets are tepid, with discoveries as well as mergers and acquisitions supplying whatever action the market sees. The junior financing market has really bifurcated, with quality management teams and properties regularly over-subscribing offerings, while the lower tiers of juniors are currently facing very challenging financing conditions.
Rising precious metals prices have not generated greatly increased cash flow and earnings in line with market expectations, as production cost, led by social rents, increasing at least in line, with commodity prices, although we expect margins to widen, this quarter. Oil and gas operators, on both sides of the border, and internationally are generating record cash flows, but have been reticent to commit enough new projects and sustaining capital, in our opinion. We believe that this sustaining capital expenditure drought will dampen production in 2025 below market expectation, and keep commodity prices stronger than the market expects unless there is a solution to the Ukraine crisis.
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