Commodities Bubble Will Not Burst: CEO
Assistant Editor, CNBC.com
The commodities bubble is not set to burst, and any easing off of copper prices will be temporary, Stephen Twyerould, CEO of Excelsior Mining told CNBC.
“I don’t see it bursting; I think it’s a cyclical industry that we’re in. I’m a mining person so I’ve been in it for 25 years, so there are ups and downs… I don’t see it bursting, it may come off, but ultimately that will pick back up again,” Twyerould said.
He said demand remained high and played down concerns that a slowdown in the Chinese economy would hit copper demand and cause prices to fall, saying the long term impact would not be significant.
“There’s been talk about China and their downturn or their easing off on their financial policies, I think longer term companies like Rio (Tinto), they’re talking about 50 or 100 year mine lives on many of these projects, so they take a much longer term view on that,” he said.
“Our company we take a long term view on copper, so we’re very bullish on that,” he added.
However, mining stocks have not done well compared to copper prices and Twyerould said there could be problems ahead for smaller firms who have overinvested in expectation of high prices.
“It depends on the organization, when you have a smaller organization that overinvests, that puts the company under a lot of stress, I think a lot of the larger companies like your Freeport’s etc, they do take a longer term view and so because of that I don’t think they’re at risk of overinvesting quite honestly,” he said.
M & A Boom
Twyerould said he expected more deals between commodity firms in the current copper price environment, which has seen many build larger than usual cash reserves that they may look to use to grow through acquisition.
"Some of the bigger companies are making a large amount of cash and so it’s a smart investment for them to use that cash for M&A activities," he said.
Twyerould also said he had seen an “uptick” in the mining business in the United States, adding that there had been an “attitude shift” in mining states like Nevada, Arizona and Utah where firms were issued permits to mine in a drive to boost employment.
On the US economy, he remained optimistic, saying that despite a spate of bad economic data, “I like to think it’s a mid-cycle slowdown, I’m an optimist so certainly I like to think it’s a mid-cycle slowdown.”