The South’s “super-rich” advance on metals & markets « Mining Blog

The South’s “super-rich” advance on metals & markets

8. October 2011,

There are more affluent “households” in the US than any other country, according to a recent study by London’s TNS consultancy, based on interviews with 12,000 people in 24 countries. See:
http://www.tnsglobal.com/news/news-E3D2655B5DD64D8A8E04BBD057060B66.aspx

That’s hardly rocket science. But what may surprise is the study’s conclusion that, taken on an individual basis, rich Chinese, Arabs in the UAE, Indians and Singaporeans, now have at least as much – if not more – money to invest as their counterparts in Europe.

One caveat must be entered here: the study is far from “global”. Apart from those in the Czech Republic, no eastern Europeans were interviewed for the research. Although some interviews were conducted in Brazil, no other Latin American state was included. Thus, for example, TNS seems to have ignored the investment preferences of Mexico’s Carlos Slim, the world’s richest man (according to Forbes March 2011 “global billionaires” list), who is head of minerals conglomerate, Grupo Caruso, and is worth around US$74 billion.

What kind of enterprises are being backed by such wealthy men (and a few women, no doubt)?

According to TNS, there are “big differences between markets, even when they border each other geographically: only 5% of Norwegians invest in bonds, compared to 31% of the Swedes. And while the popularity of commodities fluctuates at a global level, they are very popular among India’s affluent. These are the insights that make all the difference when trying to engage the wealthy with a specific product or service.”

As to the nature of those financial “products”, TNS finds that “[w]hile the Chinese, Indian and German affluent are keen investors in precious metals (cited by 35%, 33% and 23% of respondents respectively), this falls to just 3% in Sweden, Norway and the Netherlands, and 2% in Denmark and Israel.”

Once again, the figures should be treated with some caution, since they are not dis-aggregated. Over the past 3-4 years Chinese entrepreneurs have mined or purchased more new gold than citizens in any other country (with Indians falling not far behind).

But London-listed Fresnillo plc is the world’s biggest producer of primary silver, and majority owned by Mexico’s Grupo Bal, headed by a Mexican called Alberto Bailleres, whose fortune was valued by Forbes at US$11.5 billion in March 2011. Also, the biggest investors in silver of late (as revealed by Sprott Asset Management in June this year) appear to have been JP Morgan and the UK’s largest bank, HSBC.

The world’s two major producers of platinum group metals (PGM) are located in Russia (where Norilsk is the main producer) and in South Africa (where the companies are led by Anglo American). Between them they control around 80% of global PGM output; and their prime investors are Russian oligarchs and South African, UK and western European – hardly a Chinese, Indian, or Arab investor in sight.

However, “developing” country billionaires may well now be putting a large proportion of their profits into precious metals’ Exchange Traded Funds (ETFs) which now hold huge amounts of physical gold, silver and platinum. The problem is that, of their nature, ETF fund managers don’t reveal who subscribes to them or where those individuals are located .

It will “take some time before we really see a shift from West to East” says TNS. Its study identifies the “incidence of affluence” in the U.S. as being no less than 27 per cent; 20 per cent in Canada; and 11 per cent in the U.K., “while the proportion in China is 0.75 per cent [and] India’s affluent make up 1.25 per cent of the country’s population”.

Moreover, just three states – the U.S., Japan and Germany – between them account for more than half the world’s millionaires.

Nonetheless, says Reuters in a separate report [7 October 2011], a global study of wealth published this year by Merrill Lynch and global consulting firm, Capgemini, “ found China has the world’s fourth-largest population of millionaires.”

Companies and funds, based in the global North, continue attracting the bulk of mining and minerals-directed investment.

But, as we know from scrutinising both the amounts, and direction, of capital expenditure coming from India, mainland China, Hong Kong, the UAE and Singapore, the balance of overall control over the worlds’ remaining mineral troves has begun to change.

Anong the world’s Top Mining Multinationals, Rio Tinto already has a Chinese company, Chinalco, as its largest shareholder (at around 9%), while Vale, the world’s premier iron ore miner, is controlled by a joint venture controlled between Brazilian government pension funds, the Brazilian bank Banco Bradesco and Japan’s Mitsui. Codelco, the leading copper producer, is still owned by the Chilean government.

However, there are plenty of mid-cap mining companies lying in wait for potential investors from the Global South.

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