Metals & Mining

We believe metal and mining equities have overly discounted late cycle fears. Reflecting extremely poor sentiment driven by sharp commodity price deflation, US dollar strength, and decelerating emerging market demand expectations, valuations entering 2019 appear supportive of attractive risk/reward dynamics. Balance sheets and operating profiles have been positioned to support free cash generation and recapitalization. Mining shares reflect a resumption of US dollar strength, despite market and investor expectations suggesting more moderate policy and liquidity removal. While recognizing some Q4 2018 global economic data have softened, lagging capital investment, deferred commodity supply growth, generally low visible inventory levels and a surprising, but welcomed measured capital allocation attention by boards and managements could lead to a sharp reversal in sentiment, pricing and valuation.


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