BRIC may cure any resource sector ills
SHIRLEY WON
From Thursday's Globe and Mail
November 22, 2007 at 6:34 AM EST
Hedge fund manager Veronika Hirsch is cautious on the Canadian stock market, but is upbeat on the resource sector getting a lift from growth in the so-called BRIC countries.
BRIC is an acronym term for the four largest rapidly emerging market economies - Brazil, Russia, India and China.
"The BRIC countries will grow enough to make Canada an attractive place [to invest] because they will still buy our resources no matter what happens in the United States," said the chief investment officer at Toronto-based BluMont Capital Corp.
North American stock markets have been in turmoil because of fears of a U.S. recession that will crimp corporate profits. The collapse of the U.S. subprime mortgage market has triggered a credit crunch that has affected corporate borrowing.
Even if the United States heads into an economic downturn for a couple of quarters, "we are not expecting a protracted recession," she said.
Strong growth in the BRIC countries and their growing middle class should drive demand for metals used for infrastructure projects and gold for jewellery, Ms. Hirsch said.
The resource story will also be fuelled by a declining supply as a result of the longer time taken by mines to come on-stream today to feed the growth in the BRIC countries, she added.
New projects are being delayed because of a shortage of key mining personnel and special machinery as well as hold-ups caused by environmental assessments, she added.
"Twenty years ago, when you discovered a mine, it was in production in three years. It was one year to get a permit, and two years building it, roughly. Now you are looking at probably six to 10 years."
The delays should prolong the resource cycle - which began in 2003 - and take it beyond the typical five years when the United States drove the world economy, she said. "We think this cycle is going to be a 10-year or perhaps a 15-year cycle. ... But it doesn't mean that every year is going to be wonderful."
Ms. Hirsch, who invests mainly in Canadian stocks, runs two alternative strategy funds with assets of $220-million. They include the Blumont Hirsch Performance Fund, which posted a 16.45-per-cent average annual return for 10 years ended Oct. 31.
About half of this fund, which is now 16 per cent in cash, is invested in resource companies.
She owns other stocks playing on the BRIC theme such as agricultural and industrial companies. This fund does not own any financial or utilities stocks.
She is long:
Andina Minerals Inc. (ADM-TSX-VEN): Last month, Andina boosted its resource estimate - not reserves - to seven million ounces of gold at its Volcan project in Chile following new drilling results. The junior miner has "enough sizzle" to interest a multinational company, and eventually be a takeover target, she said. Andina has also embarked on new drilling at the Volcan site. "There is going to be a lot of news coming over the next three to five months," she added. The stock yesterday closed up 2 cents at $4.80.
Petrobank Energy and Resources Ltd. (PBG-TSX): The oil and gas producer "continues to surprise us with good news," she said. Duvernay Oil Corp. recently struck a deal to use Petrobank's THAI oil extraction technology in exchange for giving it an equity stake in its Dawson property. Petrobank's Bakken play in Saskatchewan is not affected by Alberta's new royalty regime, and its Colombian subsidiary Petrominerales Ltd. is "doing well," she added. Petrobank yesterday closed down 65 cents at $53.91.
She is short:
SPDR Financial ETF (XLF-A): The exchange-traded fund invests in a basket of U.S. financial stocks. "The problems in the housing market have spilled into the financial sectors," she said. "The whole sector suffers when one or two banks have a writeoff. People speculate who is going to be next." The units closed yesterday down 45 cents (U.S.) at $28.59.
Но следить за финансовым положением брокера не помешает. 
