Once operating costs, economic conditions, and the appetite for equities are taken into account, many commodity investors are indifferent as to whether they own mining stocks or the physical commodities.
However, as I've noted here at When Giants Fall and in my book of the same name, the structural dynamics of global resource markets and a changing geopolitical landscape mean that another factor will increasingly come into play: resource nationalism.
In essence, the more a commodity is worth, the greater the risk that those who control the sources of supply or means of production will see those assets nationalized, expropriated, taxed to death, stolen by non-state actors, etc. leaving them in the lurch.
But that is not to say those risks are not already present. With economic and political pressures growing as the global crisis continues to play out, it's no surprise that some resource-rich regimes are already considering the full range of options, as Credit Writedowns reveals in a brief snippet from "South Africa: Nationalising Mines?":
This comes via Brown Bothers Harriman’s Win Thin (no link available):
South Africa’s ruling ANC said that it was open to discussing demands by its labor union allies to nationalize its mines. This is an astounding admission, and confirms our worst political fears with regards to the new Zuma administration. First, they get rid of respected Fin Min Manuel, now they’re talking about nationalization?
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