COMMODITIES: Key Themes In Metals & Mining, BHP and Freeport Highlighted - Goldman Sachs
Goldman Sachs ( GS ) put out a note today outlining its key themes in the metals & mining sector in the last decade and the team's expectations for the next ten years.
As a backdrop, commodity prices began to increase in 2003 as result of growth in China. The concept of BRICs (Brazil, Russia, India, and China) emerged as global demand for mining started to gain traction post the dot.com bubble. Companies within the metals and mining sector have merged (or divested, or disappeared), conventional valuation metrics have changed, and the use of commodity contracts as tools for hedging has been challenged.
Bottom line: GS believes that in the next decade, the focus will shift to the new environment, mining in an era of carbon constraints, reasserting control over government policy, and shift into late cycle commodities such as potash.
As a result, GS outlines 3 stocks that should be favorably impacted - BHP Billiton ( BHP ) owing to its environmental footprint and late cycle commodities, coupled with a high quality balance sheet, Uralkali (URKAq.L) due to its focus on potash, and lastly, Freeport-McMoran ( FCX ) given its exposure to copper.
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