Casey Research
Natural-resource-based
industries are very capital intensive, and hence extremely cyclical. It
is not unreasonable to say that as a natural-resource investor, you are
either contrarian or you will be a victim. These markets are risky and
volatile!Why cyclicality?
Let’s talk about cyclicality first. Some of the cyclicality of these industries is a function of their being extraordinarily capital intensive. This lengthens the companies’ response times to market cycles. Strengthening copper prices, for example, do not immediately result in increased copper production in many market cycles, because the production cycle requires new deposits to be discovered, financed, and constructed—a process that can consume a decade.
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