Robert Friedland’s bait and switchBy: Tim Wood
Posted: 2004/03/02 Tue 21:52 EST | © Mineweb 1997-2004
NEW YORK (Mineweb.com) -- Robert Friedland, the Orient’s Occidental oracle who doubles as chairman of Ivanhoe Mines [HUGO], claimed to have been blindsided on Tuesday at a resource investment conference.
Scheduled to tell investors about African Minerals, his soon-to-be-listed play on nickel and platinum, Friedland professed ignorance. “African Minerals is a private company. I have nothing to say about it. . . I don’t know how I got roped into talking about this private company. We literally really have nothing to say.”
In case you missed that: African Minerals, private company, Robert Friedland, hush-hush.
Fortuitously, the “schedule malfunction” was a perfect segway to talk about Chinese platinum demand. Yep, you’ve heard Friedland’s spiel on Chinese copper demand in detail, but he led off very strongly with nickel and platinum.
On a day that started with Newmont’s [NEM] Pierre Lassonde, a peerless gold promoter (in the nicest sense of the word), talking gold up; Friedland closed proceedings by talking it down.
“Chinese platinum imports are up 50% in the last few years. Chinese are very smart people, they know theoretically that in the crust of the earth there should be 50 or 60 ounces of gold for every ounce of platinum,” he said. Twisting the knife after the first plunge: “There’s certainly no platinum in central bank vaults;” coup d’grace: ”We’ve told all of our male friends that if you offer a Chinese girl a gold ring, she says, ‘what do you think I am? Cheap?’ And if you give somebody a gold Rolex, they say, ‘how very passé. How very seventies, early eighties.”
Got that, World Gold Council? “It’s really not cool in China anymore to be flashing a gold watch. But platinum’s okay. It’s expensive and it’s subtle.”
Feeding such pgm materialism will be a problem, says Friedland, because the metal can’t be found in China in any significant quanties.
“China now accounts for half the world’s platinum jewellery consumption and the figure is rising,” he said. Friedland is betting that jewellery demand will be a bigger factor than industrial substitution even as prices have rocketed to their highest level in nearly a quarter century.
Friedland went on to deliver a feature length prequel for Ivanhoe’s Oyu Tolgoi deposit, reiterating how the demand of the modernising masses in India and China will soak up copper – and almost irrespective of price because large run manufacturing efficiencies are driving unit prices down even where metal components are significantly more expensive.
“Every year we patiently try to explain about China – take lessons in Chinese and make sure your kids do because if you don’t we’ll definitely be doing their laundry in thirty or forty years,” was Friedland’s latest variation on his prophecy of Chinese supremacy.
We are among those who fret about a China bubble given the hype around everything the country is doing. Friedland says it is “emphatically not a bubble” and noted that China’s economy is some three fifths the size of America’s, but “nothing has been built yet” even as the country manufactured more steel than the US and Japan combined in 2003, and as foreign direct investment last year exceeded the US’s for the first time in a century.
Copper demand is apparently so voracious (backed up by prices at eight-year highs) that Mitsui representatives recently complained to Ivanhoe executives that they feel like victims of a conspiracy to deprive them of concentrate because they have heard of the first negative cost smelting and refining contracts in China. “The Chinese are actually paying money to smelt and refine copper.”
By the way, Friedland appeared to drop an exceptionally large and loud hint about Mitsui and Ivanhoe by weaving in this bit: “We met with Mitsui in London. We had a very high level delegation from Mitsui, which financed the Collahuasi mine for Anglo and Falconbridge.”
Interestingly, Friedland has modified an earlier version of China’s deflationary impact on the world. Last year, at the PDAC Convention in Toronto, he presented it as a destructive force that would sweep everything before it, rendering China all conquering. Now he characterises it as a “deflationary boom”.
“It’s not a zero sum game. It happened in Australia and the United States. In a deflationary boom the price level of stuff drops even as the liquidities of the buyers rises and they can buy stuff at ever lower prices.”
Overall, he’s asserting that the urbanization urge will be unstoppable in China, with India playing tag lest it be permanently embarrassed by the growing gap at all sorts of levels.
All the arguments are persuasive. However, they are also only bullish where he is uniformly bearish on Europe. We’ve pointed out before that China has a day of reckoning with its legacy of social engineering and demographic collisions could most certainly derail the entire thesis.
Still, Friedland has a more positive tone compared with even late last year and he’s hoping for a “perfect storm” for his line of business.
“If it wasn’t for China, there wouldn’t have been any [economic growth]. . . If the US can successfully reflate and the Europeans can get their growth up to one or two per cent, it’ll be a perfect storm. It’s much more interesting and profound than people inside the industry [appreciate]. Most miners are quite pessimistic. They know about new mines in production. . . they know about supply, they’re bearish. They know nothing about demand,” Friedland said.
In conclusion, Friedland reminded the sold out audience about the circumlocution: “This is sort of a bait and switch. I don’t really know how I got here. We wanted to show you a few slides to tell you that this is a really real phenomenon. It will still be here next year and the year after. China is not going to go away.
”We appreciate the chance to get this out of the way. . . thank you very much for the warm-up session.” Indeed; no-one else has the option for two lengthy slots to speak about the same thing at this year’s BMO Nesbitt Burns Global Resources Conference.