Salient to Investors:

Mining companies are extending massive cuts in exploration budgets for a second year, setting up the next price boom as China continues its relentless pursuit of metals and energy. Daniel Sacks at Investec Asset Mgmt said companies are smart by cutting back on exploration as it is a cyclical industry.

Richard Schodde at MinEx Consulting said we struggle to find enough deposits to replenish what we mine as enthusiasm or financial capability to fund exploration is fairly limited. Schodde said the current drop in exploration may create supply shortages because it can take 10 to 12 years to develop a mine from when a deposit is discovered.

Colin Hamilton et al at Macquarie said today’s slower growth rates in mine output increasingly are being priced into metals.

The median analyst expects platinum, aluminum, silver, nickel, zinc, lead and uranium to rise by 2017. The median estimate calls for aluminum to rise 22 percent in 2017 from Q1 2014 and uranium to rise 69 percent.

Markus Bachmann at Craton Capital said the biggest investment cycle in history has not produced enough capacity.

Justin Eve at PricewaterhouseCoopers said mining companies have to balance the still strong demand coming out of Asia, particularly China for iron ore, with decreasing cash flows from lower commodity prices. China is forecast to grow 7.5 percent in 2014 and 7.2 percent in 2015, the fastest in the world.

Citigroup and Goldman Sachs predict the commodities slump will deepen in the next few years.

Tom Price at UBS said those wise to invest in exploration because they have a long-term picture are smart but extraordinarily rare.

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