Commodities: Gold Mining Companies

Gold mining companies looking to preserve capital for yellow commodity business

Until the forced liquidation period is over, mining companies will have as their major goal the preservation of capital, rather than exploration and expansion. In other words, survival is the key during this difficult economic period.

None of the underlying fundamentals for demand has changed, as the needs of China remain. What all this will do is prolong the commodity bull market as we go through this temporary hiccup.

Like in any difficult time, commodity companies with heavy debt loads will suffer more than those that are run leaner. It's also probable that some of them either won't survive, or they will be bought up by healthy companies.

As far as commodities that at this time are being considered hot for 2009, tin, manganese, molydenum and bauxite are looking good. Others like cobalt, zinc and vanadium are probably going to tank over the next year.

Allan Trench, Australasian regional director of CRU research and advisory group said, "There is opportunity for the likes of tin, manganese and bauxite -- in the same way there was in uranium two years ago and as there was in phosphate earlier this year -- for IPOs."

Commodity companies that are well run will be looking to preserve capital throughout 2009.