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Top Investors Eye European Mining Renaissance

Written By Brian Hicks

Posted November 5, 2011

“You’ve got to see it for yourself… the reporters sitting in their offices in New York or wherever don’t have a clue.”

That was the last thing I was told by a colleague who’d just uncovered an early-stage boom with extreme growth potential.

About 48 hours later, I was walking out of the Angel Publishing office in Baltimore, suitcase in hand, when I ran into a few colleagues returning from lunch.

They asked where I was going.

I’m typically late for flights, so I wanted to avoid the inevitable quizzical looks and the “Why on earth are you going on there?” questions, so your editor quickly responded, “Spain!” and kept walking.

What I found — and what a few other big-money investors are finding as well — is there are some massive opportunities for those willing to look beyond the headlines in Europe.

Desperate Times

I know what you’re thinking… Spain?

I was thinking the same thing.

All of Europe is in a perfect economic storm. Massive debts, bloated government, an unwieldy dependent class, and a currency with no place to go but down have put the European economy in a bind.

The PIIGS are the worst of the terrible.

In Spain, for example, the nationwide unemployment rate is over 20%. Where I was in Northern Spain, not far from the Portugal border, the unemployment rate is over 30%.

It’s just bad. And it’s on the verge of getting much worse…

Money has been “cheap” for a long time. But that’s quickly changing in the countries hit hardest:

Europe Interest Rate INcreases 

As you can see, interest rates have soared in Greece, and Italy and Spain are starting to catch up, too.

Higher interest rates mean higher borrowing costs and, since we’re still in the debt-bubble-boom era, sharply-reduced economic growth.

It’s a downward spiral: Lower growth leads to less tax revenue, which leads to higher interest rates and even lower growth, and on and on.

Europe is facing desperate times. And they’re taking what will surely be viewed by many Europeans as “desperate” measures.

A Billion-Dollar Bet on Europe

Desperate measures in Europe call for doing anything to provide jobs and get the economic engine running again. And the big money is getting in early.

You see, while I was in Spain, Qatar Holdings announced a surprising bet on the resurgence of European mining. The Qatar sovereign wealth fund announced it would lend $600 million to European Goldfields (TSX: EGU), a company that owns gold mining and development projects in Greece, Romania, and Turkey.

As part of the deal, Qatar Holdings received the right to buy 15% of the European Goldfields. All told, Qatar’s investment in Europe’s fledgling mining industry will likely total around $1 billion.

Canada’s Globe & Mail summed up the deal: “Qatar has come to the rescue of Toronto-listed European Goldfields and, in its own small way, to Greece itself.”

European Goldfields’ shares have climbed 35% since Qatar’s financial vote of confidence — an increase in total market value of $600 million for the relatively small company.

This is the tip of the proverbial iceberg when it comes to Europe’s mining renaissance.

Pro-Mining Vandals Strike

Although most investors never consider it, there are extremely large mineral reserves throughout Europe.

Harry Miskimin states in The Economy of Later Renaissance Europe:

Around 1300, mines that had been successfully exploited during the affluent years of the commercial revolution began to lose their productive capacity. Old ore beds were exhausted and additional minerals could only be extracted at ever increasing depths. Such depths, however, were beyond the technical capacity of late medieval mining engineers and problems of mine drainage proved insurmountable.

A lot has changed since then.

Mining is now a science. (My colleague Nick Hodge’s recent helicopter tour of a massive mineral discovery shows rapid advances made in mining engineering.)

Miners now go more than a mile underground to pull out gold and other minerals. Gold can be produced profitably from ore that contains a fraction of a gram of gold per ton of ore.

And the engineering feats of mining companies are only getting better with every uptick in gold, copper, and other mineral prices.

What hasn’t changed is the large mineral deposits are still there.

Europe has supported mining for millennia. The Roman Empire expanded across the continent primarily to get more gold and natural resources.

On top of that, many of the highest-potential mining projects have been kept off-limits by governments and environmentalists for years.

But now, the public attitude in some of the hardest-hit areas is changing…

For example, as I recently showed Freedom & Capital readers, there is a loud and public outcry for more mining — and the jobs and economic growth that come with it.

The picture below is from my trip to Spain. The small town I visited has a welcome sign that has been struck by something I thought I would never see: PRO-mining vandalism.

Spain Oro Si

It says “Oro Si,” or in English: “Gold, Yes.”

When you see pro-mining vandalism, you know attitudes are changing.

And that’s great news for investors looking at the next big areas to mine.

Big Busts and Bigger Booms

Europe’s a disastrous economic position. There aren’t too many ways out of the economic decline for most of the continent.

The hardest-hit areas can no longer afford to prevent “evil” industries like mining from developing. Many of them have reached a point of actively encouraging mining.

And with the commodity boom still in full swing, Qatar’s investment in Europe’s mining business proves the money is there to develop these large, untapped resources into wealth-producing mines.

Of course, the transition will take time…

But there’s a new boom underway in Europe. And it’s going to be in mining — one of the last industries you’d ever expect the hyper-environmentalists in Europe to allow.

The biggest booms are always born from the ashes of the biggest busts.

Europe is in great position for a boom.

But the majority of the mainstream financial media will not see it until the boom is already well underway — and after the biggest profits have already been made.

More of the week’s top investment ideas from Wealth Daily and Energy and Capital below.

Good investing,

 Andrew Mickey Signature

Andrew Mickey
Editor, Wealth Daily

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