A backroom political ban on investing in companies deemed impure by environmental NGOs is unfairly depressing the prices of some of the leading gold mining stocks, and hurting pension funds, Coxe says.
RENO (MINEWEB) – Why would a pension fund not invest in a highly profitable long-duration mine (such as BHP’s Olympic Dam copper-gold-uranium deposit in Australia with a 40-year lifespan)?
In the May edition of Basic Points, respected global commodities analyst Don Coxe says pension funds are succumbing to political pressure, resulting in “more and more corporate pension funds…being impaled on their own funding swords due to inadequate investment returns.”
Coxe suggests that commodity stocks are “victims of a new form of persecution from two groups-those with contempt for capitalism, along with those who resent what mining, and oil and gas companies do for a living.”
“The original Luddites smashed the machines of the Industrial Revolution,” he observed. “Today’s Luddites take to the court and take to the streets, and to the annual meetings of commodity companies. And they take to the investment policy meetings of major tax-exempt investors.”
“One reason mining and oil stocks are so cheap is that these industries are almost uniquely subject to political risk; once you have spent billions to open a mine or an offshore oil field, you are, potentially, a hostage to politicians who can raise your taxes at will or even seize your assets,” said Coxe.
While mining and oil companies have long lived with risks from looting governments, Coxe said, they now face “a bigger, global challenge from environmentalist coalitions which seek to prevent mines and oil deposits from being developed, or who harass them for operating practices that don’t meet all their criteria, through alliances with local politicians and/or radical groups.”
“Even formerly politically-secure regions are proving problematic because of rich, powerful, litigious environmentalists,” he observed. “Under the globally unique American tort system, they can launch vexatious lawsuits that cost corporations millions to defend, but even when their cases are eventually dismissed, the court will not award the defendants any of their defense costs.”
In his analysis, Coxe noted that the Obama Administration, which speaks glowingly of job-creation, halted the development of the mammoth Keystone pipeline from Canada to Louisiana.
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