Canadian Mining Companies Are A Worthwhile Investment
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Following the explosive growth in both gold and silver during 2011, many investors are searching for the next big thing in the mining industry for the approaching year. To this end, a lot of the largest asset managers are already placing themselves in Canadian mining companies that target uranium. While the continued success of mining investments is highly linked with inflation expectations remaining high, the actions of the so-called mega funds suggests that the economic landscape should remain favorable. ##Mining Investments in Uranium Scanning the investment activity of big institutional investors has long been a popular starting point when developing a robust portfolio. Mega funds, defined as those few funds that manage over $100 billion is assets, have the capacity to single-handedly move the stocks they purchase. The activity by these funds in Canadian mining companies that concentrate on uranium is a great indicator that this may be the newest thing in the mining industry. ##Inflation Expectations While things do seem to have improved in certain ways in Europe, the debt crisis that's plagued the economy is far from resolved. With global credit lines being shrunk or removed, the demand for capital stays high. A high demand for cash means inflation is likely. The expectation that is prevailing in the market is that this situation is unlikely to resolve itself swiftly. ##Hard Commodities Commodities tend to perform well when there are high inflation expectations. This occurs because commodities are seen as good stores of wealth when prices are increasing; if goods cost more, conversely, the materials that are used to create them must increase in price also. Hard commodities are those that are lasting and relatively cheap to store. Differentiated from soft commodities, like grains, hard commodities are usually easier to use as long-term investments, particularly when one is focused entirely on the physical commodity. ##Uranium It is essential to keep in mind that industrial usefulness is a driving factor in hard commodities. With the exception of gold, which has a distinctive set of market forces, cooper, aluminum and even platinum are valued as a component in many goods. The value of uranium can be found in energy production, and to a lesser extent in military applications. As nuclear energy has long been the only practical substitute for petroleum, uranium demand is likely to remain strong, making it an ideal mining investment. Canadian mining companies and the mining industry in general are well positioned to produce solid returns in the coming year.