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Natural Resource Companies Focus On Returns In 2018

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Natural Resource Companies Focus on Returns in 2018

JAN VAN ECK: Hello. My name is Jan van Eck, I'm CEO of VanEck. I'm here today with Shawn Reynolds who is the Portfolio Manager of our Global Hard Assets Fund. Shawn, welcome, it's exciting to talk about commodities in 2018.


VAN ECK: We as a firm thought that commodities were bottoming at the beginning of 2016. We're several years into this cycle now. Tell us what's happened, what's happening now, and what you see happening for the rest of 2018?

REYNOLDS: That cycle turn that we saw in the beginning of 2016 was really the result of multiple years of restructuring that went on throughout the entire resource space. That restructuring was really defined by restriction in capex. Part of that was due to the restriction in cash flow because we had lower commodity prices, but it was really an overt effort to restrain capex, focus on operational efficiencies, and really try to get yourself in better shape operationally, as well as financially.

We saw some corrections and some strengthening in the balance sheets. As we entered into 2016, we started to see a really good response with regards to better operating performance and better financial performance. Now what you're seeing (in '16, '17, and early-'18) is the beginning of the supply response of those commodities from the outcome of that lower capex.

Looking forward, you really have one of the best setups that I think we've seen since the mid-2000s. You have finally a tailwind in the macro sense with regards to better GDP outlook, the first tailwind we've had since the financial crisis in 2008/2009. You have the space very much under-owned due to some of the issues that we had in the pre-2016 period. But, more importantly, the industries and

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