Panelists weigh impact of Trump presidency
If U.S. president Donald Trump could make good on his campaign promises to slash taxes, renew the country’s aging infrastructure and loosen environmental constraints on resource development projects, the mining industry would benefit big time, but a short term bump in the economy is probably all we can expect, according to a panel of mining investors at the Mines and Money Americas conference in Toronto October 3rd.
Asked to comment on the effect of the Trump presidency on the mining industry, Rick Rule, chairman and founder of Sprott U.S. Holdings, said, “I take the view that Trump is almost irrelevant because the establishment of his own party hates him, the other party hates him a little more… and rather than try to win one fight, he picks 50. My suspicion is that picking 50 fights when you have no allies guarantees that you win none.
“Ironically,” Rule continued, “I think that’s very good for the U.S. economy because my own experience is that only bad can come out of Washington and if we had a circumstance where nothing got done for four years, I think that would be positive. So, if he has any outcome, it will be inadvertently positive.”
Uranium and coal miners might benefit if the permitting environment was slightly easier, but he won’t have much effect on the industry as a whole, said Rule.
“I think we may get an extra year and a half, maybe two years of economic growth as a result of misplaced enthusiasm.
This gives investors an extra window of opportunity for raising capital, so I think you should be taking advantage of this because when the next recession comes and the elites, PhDs and the banks no longer have anything they can do and it’s not clear who’s in charge, the great big ETFs out there are going to get hit on all sides.”
Dave Lotan, CEO of LHI, said the bond market isn’t buying the idea that lower taxes and higher spending will lead to more growth.
“I don’t see this as being much more than a bump and if this is all the bump we’re getting, I suppose it’s better than Hillary.”
Michael Danov, president and CIO of SBP Management, said the mining industry would celebrate if Trump eased mining regulations and if mining companies could be tempted to invest in mine development in the U.S. instead of South America and Africa, but questioned whether it’s a priority for him given the crises and controversies he has on his plate.
Responding to Danov, fellow panelist Rick Rule pointed out that “mining is irrelevant to the U.S. It’s a substantially smaller business than commercial air conditioning.”
The one thing that Trump can do to help the industry is in his role as counterfeiter-in-chief, he added.
“He ultimately presides over some of the levers of the American economy and the last great competitive advantage that the U.S. enjoys is that we have the world’s most liquid lie – the deepest sovereign capital markets in the world – and to the extent that he can preside over an empire that lowers the cost of capital to sub-zero terms, which is what we have today, he will have done the mining industry a great temporary favour.”
One thing the Trump administration does is create a lot of uncertainty, “and that’s great for gold, which is something I care a lot about,” remarked Danov.
Noted Canadian investor and strategist Don Coxe echoed Danov’s point, predicting, “we’ll have a big move into gold” once we realize that we can’t count on the institutions to get things done.
The massive U.S. debt and off balance sheet liabilities will ultimately have to be dealt with – inevitably by default, said Rule, who pointed out the U.S. could opt for an honest “too bad, so sad” default, but is more likely to “inflate away the net present value of its obligations.”
Concluding the discussion on a note of optimism, Coxe said we can feel good knowing “we have a room full of people who came here primarily to find reasons for owning and buying more gold.”
Mines and Money America returned to Toronto for the second consecutive year thanks to a sponsorship arrangement with the Province of Ontario. The event attracted more than 700 attendees, including 250 investors and 120 mining companies.
“Mines and Money is a very strong brand and it’s a great opportunity for the mining industry and junior exploration companies to meet with investors from around the world,” said Ontario Northern Development and Mines Minister Michael Gravelle. “We are the mining finance capital of the world, so it made sense for us to host and sponsor it.”