Resource forecast-expert-opinions-covering-precious-metals-and-more

Resource Forecast 2017 Expert Opinions Covering Precious Metals and More
© 2017 Resource Investing News 1
Table of Contents
Gold Outlook 2017: Analysts Call for Price Increase................................................................2
Silver Price Outlook 2017.......................................................................................................6
Platinum Deficit to Continue in 2017......................................................................................9
Copper Price Forecast 2017: Goldman Sachs Running with the Bulls .....................................11
Zinc Outlook 2017: A Strong Year Ahead ..............................................................................15
Lithium Outlook 2017: Analysts Weigh In.............................................................................18
Uranium Outlook 2017: Experts Expect a Slow Recovery ......................................................21
Cobalt Outlook 2017: Price Revival Expectations ..................................................................24
Graphite Outlook 2017: Will the Market Take Off?...............................................................29
Cannabis Outlook 2017: Legalization on the Horizon ............................................................33
Oil and Gas Outlook 2017: OPEC vs. Trump ..........................................................................37

Gold Outlook 2017: Analysts Call for
Price Increase
While the gold price cooled off significantly after the US election in
November, the yellow metal is poised for a lift in 2017.
Unsurprisingly, 2016 was a volatile
year for the gold market. At the start of
the year, analysts were all over the
map on the 2016 gold price;
predictions were as high as $1,382 per
ounce, while others projected the price
would fall lower than $1,000 an ounce.
On the contrary, the gold price had a
strong start to the year, rising to
$1,237.90 per ounce before March. By
July, the yellow metal had soared to $1,365.40 per ounce, following the Brexit decision
in June. Since then, the gold price has dropped off drastically–despite a momentary
spike during the US election–trading at $1,132.50 per ounce on December 20, 2016.
To get a better idea of what drove gold in 2016, and what to look for in 2017, the
Investing News Network (INN) had the chance to speak with Jeffrey Nichols, senior
economic advisor at Rosland Capital LLC, David Morgan, analyst at the Morgan Report,
and Erica Rannestad, a senior precious metals analyst at Thomson Reuters GFMS.
2016 gold themes: politics, US dollar and inflation
Indeed, it’s impossible to talk about the gold price without mentioning the implications
Brexit placed on it or, more recently, the US election.
Rannestad elaborated by saying Britain’s decision to leave the European Union and the
election of Donald Trump as president “lead to increased uncertainty” in the market.
However, in speaking with INN, Morgan commented that the outcome of the US election
wouldn’t particularly impact the precious metals sector.
While that could certainly be the case long term, the gold price did substantially fall off in
the days following the election, even dropping to nine-month lows.

Nichols agreed with Rannestad, commenting that Trump’s victory had huge implications
on the gold market, and the resource sector in general.
“His statements over the course of his campaign were all contradictory so we don’t
really know where he stands on a lot of issues,” he noted.
In that regard, Nichols said he was surprised the failure of inflation didn’t push the gold
price as much as he expected it would in 2016.
“I was much more bullish in the market,” he told INN of his thoughts on the gold market
in 2016. “I was surprised by the failure of gold to move substantially higher.”
Relatedly, Nichols pointed out that many people look at interest rates as a key to the
gold price. Instead, he said it’s the real interest rate that should be considered.
Gold outlook 2017: surprising price increase?
Moving into 2017, gold is expected to move much higher, Nichols added. Specifically,
he said there’s going to be a “surprising gold price increase” that could come within
striking distance of its historic highs later in the year, based on monetary policies.
To that end, however, Yaremchuk said the statistical and technical indicators he follows
suggest that gold was getting overbought and that it was due for a correction.
Yaremchuk said one key indicator is the moving average of convergence/divergence,
which is also known as MACD, and on a weekly basis the MACD and RSIR are
indicating that the next move for gold will be up.
Over the last five years, the gold price has more or less been stuck in a bear market.
Yaremchuk noted once the bear market runs its course, and if it is indeed at the end of
a bear market and the beginning of a new bull market, then it goes in three stages.
The first stage, he said, is an accumulation stage, the second stage sees more
mainstream investment, when gold companies start performing well, and a correction
stage. The third stage is usually “the strongest move of a bull market.” On that note,
Yaremchuk said it looks the industry has just finished phase one of that stage and is
making its way to stage two.
“If this turns out to just a correction stage after stage one, then we’re going to see higher
highs,” Yaremchuk said.
Morgan agreed that gold prices will rise in 2017, noting that he is “more favorable” to a
longer consolidation period.
“2017 will definitely see a lift throughout the year,” he said. “It won’t be straight up, ebb
and flow, but will overall be higher in 2017 than 2016.”

Of course, there will be contributing factors for the yellow metal to see a spike:
importantly, Nichols noted, one thing that will be a driving force is demand from China
and India.
“Both countries have significant cultural and social affinity to holding gold as form of
investment and savings by many people in both countries but for different reasons,” he
said. “We think that’s going to continue.”
In that regard, Nichols stated that gold that goes to China and India is unlikely to come
out again in any perceivable time frame, suggesting that this is a reduction in what he
calls the “availables via gold that is available in the market place.” When westerners get
revved up again about gold and there’s an adequate supply, there’ll be higher gold
prices, Nichols said.
“The panics of the gold market rely importantly on the idea that Asia is going to be a
continuing buyer of gold,” he added. “That gold is very likely to get some strong hands
and isn’t likely to come out except at much higher prices.”
In terms of where the gold price will land next year predictions, of course, vary. Citi
Research sees the gold price falling to $1,135 per ounce in the second quarter, but
rising up to $1,180 per ounce in the last three months of 2017.
Yaremchuk said it could range between $1,200 and $1,400, but it might not be until
2018 that it “gets some serious momentum” and starts challenging previous highs, and
to not expect much higher than $1,400 an ounce. He added it wouldn’t surprise him if it
reached his highest prediction of $1,500 per ounce, but he’s certainly not expecting it to
reach quite that high.
“My gut says we continue to work our way higher in 2017, and trade in a range
somewhere in the $1,225-$1,400 per ounce range for the year,” he said.
Some higher predictions include Jeffrey Christian’s, managing partner of the CPM
Group, who told the Northern Miner (subscription) that he expects gold to average
$1,325 per ounce next year before increasing significantly beyond 2017. Scotiabank is
also optimistic about the gold price, forecasting it will average $1,300 an ounce in 2017,
while Societe Generale(EPA:GLE) is also calling for a $1,300 per ounce average in
2017. The panel over at FocusEconomics expects the yellow metal to average slightly
lower, at $1,297 per ounce next year.
However, not everyone is bullish on gold making strides in 2017. For example, ABN
Amro Group (AMS:ABN) suggests the gold price will fall to $1,100 an ounce by the end
of next year, with a price recovery coming in 2018. Chris Beauchamp, head of market
analysis at IG Group, expects gold to go lower than that, saying it could end up below
$1,000 an ounce before the end of 2017.

Investor takeaway: gold thrives on uncertainty
Looking ahead, Nichols said investors should look from technical standpoint gold’s
ability to establish itself higher than it has in the last year or two. He noted there’s been
heavy resistance in its price late in 2016, but if it can break through from there, Nichols
said he thinks it will make a big difference to investor perceptions about gold’s ability to
move higher.
“It’s pretty firm what needs to be broken psychologically for gold to really take off,” he
added.
As we all know, markets are volatile and investors flock to precious metals like gold as a
safe haven asset, and Nichols said there’s going to be a lot of uncertainty as Trump’s
administration takes form. With that in mind, those in the gold market will no doubt be
curious to see how 2017 unfolds, and how a Trump presidency will impact its price.

Silver Price Outlook 2017
What will happen to silver prices in 2017? Analysts predict a
promising year for the precious metal.
Silver prices have been surging in
2016 due to political concerns and
uncertainty worldwide, including Brexit
results and proposed policies from
incoming US President Trump.
A weak US dollar also favored silver’s
price that averaged $17.32/oz until
November, which was 9.9 percent higher
than the same period in 2015.
Silver hit its lowest price or $13.83/oz at
the beginning of the year but then steadily increased until the end of July, reaching a
high of $20.28/oz. The silver market is expected to be in physical deficit for a fourth
consecutive year in 2016 with a total annual shortfall of 52.2 Moz, the GFMS Silver
Institute reports.
What to watch for in 2017
Looking forward to 2017, there are key factors to look at that will affect the price of silver
throughout the year. By the end of 2016 the Federal Reserve interest rate may rise for a
second time in a decade, influencing the US dollar demand. Political developments
worldwide, in particular Trump’s implementation of policies, will have an impact on silver
price as well as the forecast of a higher demand and a tight supply for the precious
metal.
The Federal Reserve interest rate and the US dollar. Interest rates are forecast to go up in
the US due to inflation expectations. After Trump’s election, Janet Yellen, the Federal
Reserve chairwoman, said that interest rates could rise “relatively soon”.
Jim Paulsen, chief investment strategist at Wells Capital Management, told CNBC:
“Everyone thinks the dollar’s going to go higher because the Fed’s going to raise rates.
There have been five major rate hikes during recoveries by the Federal Reserve, and
every one of them resulted in a lower dollar, not a higher dollar.”

Steen Jakobsen, investment chief at Saxo Bank, also said that historically the dollar
often weakens after the US Federal Reserve raises rates as investors sell the currency
after buying it in anticipation of higher rates.
Political developments and concerns worldwide. Much of this year’s silver price peaks had a
strong correlation with political events in the world. The tight results from Brexit and the
US election were the main drivers of silver prices surging. The uncertainty of Trump’s
upcoming presidency may also change how prices will fluctuate next year.
HSBC analysts forecast a price range of $16 to $21.50 for 2017. “Any resurgence in
investor uncertainty or ‘safe-haven’ demand, possibly based on geopolitical concerns,
will bolster silver in 2017,” they said.
CEO and Chief Investment Officer of US Global Investors, Frank Holmes, recently
said:“At this point we’re digesting this change.The fact is that Trump is going to own the
highest ever level of debt in America. And he’s not afraid of borrowing.
“Inflation is going to be running with his programs if he goes through with a trade war.
And then if interest rates go up too quickly and too high, the housing market basically
implodes. So, the country is in a “big drama” state.”
Strong demand and tight supply. A strong investor demand for silver coins and bars as well
as growth for silver from the jewelry industry will increase demand in the upcoming year.
But the highest demand will come from the solar industry, since the precious metal is a
great conductor of both heat and electricity making it a perfect conductor for solar
panels. The GTM Research and the Solar Energy Industries Association expect
photovoltaic installation to triple between 2015-2020.
However, silver supply will decrease significantly due to a decline in mine production.
HSBC analysts expect a decline of 872 million ounces next year from 887 million this
year, with a total supply deficit of 116 million in 2016 and 132 next year.
The GFMS silver institute also estimates that mine supply peaked in 2015 and will trend
lower in the next years. This decrease in total supply will be a driver of annual deficit in
the silver market in the near future.
Analysts forecast
In a recent interview with Investing News Network, analyst David Morgan said he is
more favorable to a longer consolidation period but that 2017 will definitely see a lift
throughout the year for silver and gold prices.
He suggested that investors should diversify if they are leaning towards the precious
metals, and said: “and then that portion of your portfolio, which I then recommend 10
maybe 20 percent if you are a full-fledged gold or silver bull.”

Speaking about the resource sector in 2017 and after the US election, Sprott US
Holdings’ President and CEO, Rick Rule, said to INN: “If the resource sector that you’re
referring to is primarily precious metals, I think the direction is a little lower first because
there’s a lot of confidence in the economy, and then much higher.”
Similarly, Ed Steer, former analyst at Casey Research and now author of Ed Steer’s
Gold and Silver Digest, said: “How well silver does for the rest of 2016 and in 2017 will
depend upon the paper trading in the Commodity Futures Exchange and that is pretty
much controlled by JPMorgan Chase. But I am an optimist, I am expecting the silver
price to be much higher in 2017 and to be a big year for the precious metals.”
Companies to watch out for
About following companies in the market he said: “I would suggest any new investor to
buy the Global X Silver Miners ETF (SIL), which owns 15 to 20 companies that will keep
up with the research. Instead of following single stocks, let somebody else worry about
it.
“If I had to start from scratch all over again, I would buy that ETF plus a couple of other
things like First Majestic Silver (TSX:FR), because I am the type of guy that buys and
holds, and forgets about it.”
Investor Takeaway for Silver in 2017
It seems that silver will have a promising 2017 reaching higher price peaks than this
year. A rising demand from the solar industry and a lower mine production could make
next year a big one for the precious metal. However, investors should keep an eye on
political developments worldwide as well as interest rates, which are the main factors
that can impact silver’s performance in 2017.

Platinum Deficit to Continue in 2017
Platinum supply and demand decline is expected to continue next
year.
The platinum deficit for 2016 will be lower
than anticipated by the World Platinum
Investment Council and will continue in
2017.
The global demand for platinum, that is used in
catalytic converters, laboratory equipment and
jewellery, is forecast to decrease by 3 percent
year-on-year to 8.04 million oz.
Total platinum supply is also expected to be marginally lower year-on-year at 7.87
million oz.
WPIC CEO Paul Wilson said:“The deficit for 2016 has been revised lower this quarter,
reflecting a slowdown in retail jewellery sales in China, accentuated at the manufacturer
level, due to the higher-than-expected levels of retailer jewellery recycling this year.”
But WPIC, the global market authority on physical platinum investment, continue to see
medium term growth prospects in China as significant.
Supply and demand to fall by 2 percent
As the platinum market reaches its fifth consecutive year of deficit in 2016, the forecast
for next year is looking similar. WPIC said on Tuesday that 2017 will be the narrowest
year since 2011.
Total platinum supply in 2017 is forecast to fall 2 percent to 7.75 million oz, while total
platinum demand is also forecast to fall 2 percent year-on-year to 7.85 million oz.
The projected growth in jewellery demand will not be enough to make up for
the expected declines in automotive, industrial and investment demand.
Autocatalyst demand is expected to decline 1 percent next year as diesel’s overall
share of the autocatalyst market falls, the WPIC reported.

WPIC’s director of research Trevor Raymond said: “At the moment, the 2016
percentage of diesels on European roads is 50 percent. Our forecast for next year
includes a 48.5 percent diesel share, so that’s a fairly aggressive fall.”
But just last week, Johnson Matthey, the world’s largest platinum and palladium refiner,
said that the platinum market could return to surplus for the first time in six years in
2017 as a result of a fall in autocatalyst and jewelry demand.
“As demand in the Chinese jewelry sector seems set on a downward trend, market
balance will likely depend on the extent of growth in autocatalyst recycling and the level
of physical investment,
“Unless the latter remains at similar levels to those seen in 2016, we could see the
platinum market return to a surplus for the first time since 2011,” it said.
However, JM agreed with the expected deficit reported for 2016 by WPIC, as they said
that it was likely that the platinum market would record a shortfall of 422,000 ounces this
year.
“With spot platinum prices at a discount of $290 per oz to gold prices, we see platinum
prices as underpriced at these levels,” they said.
Platinum deficit to impact investments
A rise by 15 percent in platinum investments is expected by the end of 2016, but the
forecast for 2017 shows a fall by more than a quarter, as reported by WPIC.
But they believe that platinum will remain at the vanguard of lowering diesel emissions
for many years to come and will continue to play a crucial catalytic role in fuel cell
electric vehicles.
“We firmly believe that the opportunities for investors considering platinum as an
investment are considerable,” they said.
Palladium price has gone up by 20 percent since the beginning of the month and as a
result the price gap to platinum has decreased to below $200 per troy ounce,
occasionally reaching its lowest level since July 2002, Commodities Daily reported.
As of 3PM PST, platinum was at US$946.30 per ounce.

Copper Price Forecast 2017: Goldman
Sachs Running with the Bulls
In December, global investment bank
Goldman Sachs dramatically changed to
a bullish sentiment on the red metal, after
holding a bearish sentiment since 2015.
The surge in copper prices in the latter
part of 2016 brings cautious optimism to
investors and industry participants alike.
In December, global investment bank
Goldman Sachs dramatically changed to a bullish sentiment on the red metal,
after holding a bearish sentiment since 2015.
In the second half of 2016, big events rattled markets and shook up copper
prices: Benchmark copper was up after the Brexit announcement, copper prices surged
after Trump’s win in the US election, and a 16-month high of $2.62/lb was reached in
November.
Copper price chart for 2016
The global copper market

The copper price dipped to a low of $1.93/lb on January 19, but the red metal has
gained back some ground in the latter half and is still sitting well below the $3-per-
pound mark–largely due to a decrease in demand growth from top consumer China.
According to the most recent report from the US Geological Survey (USGS), global
copper production increased by 200,000 tonnes for a total of 18.7 million tonnes in
2015, despite reported production cuts from major miners.
The International Copper Study Group expects that world mine production will remain
unchanged in 2017 after a 4 percent increase in 2016.
The Wall Street Journal quoted Chris LaFemina, an analyst at Jefferies, as saying that
the global copper market is expected to shift from a marginal oversupply in 2016 to flat
in 2017 with a slight deficit in 2018. LaFemina also mentioned that the copper market
has been in surplus in the last seven years.
Copper price forecast according to analysts
Sprott’s Rick Rule says that based on the basics of supply and demand, the rally in
copper prices is a false one. He explained to us in an interview that, “ You come out of
the bear market one of two ways: one is demand creation, that’s where the very low
price of the commodity generate so much utility that the market takes care of itself.”
David Morgan, on the other hand, remains to be bullish on the precious metals,
but says, “Dr. Copper is called Dr. Copper for a reason. It’s got a PhD in economics,
and if we see an increase in the copper price it’s very much telling us in real terms that
there is further industrialization going on.”
Thomson Reuters’ Erica Rannestad explained to us that China is a big driver of the
copper price, since it accounted for nearly 46 percent of consumption in 2016. She
says, “The slowdown in growth in China will translate to slower growth in copper
demand.” She adds, “The copper market is expected to realize a surplus in 2017,
similar to levels seen in 2016, which will weigh on the price.”
In an emailed note, Haywood Securities Analyst Stefan Ioannou said, ”We are pleased
to see copper rallying. Miners are benefitting as (Chinese) smelters are aggressively
buying concentrate to fill capacity. However, we remain cautious over the coming
months until the ultimate fate of said refined copper output gains clarity …namely as to
whether it is consumed by infrastructure demand or ends up in warehouses.”
He says further, “Haywood’s formal US$2.25/lb 2017 estimate is arguably conservative
in the context of recent price performance and base metal market sentiment.
Nevertheless, we continue to maintain a strong medium- to longer- term outlook for the
metal as a supply-demand balance emerges on the back of a lack of new timely mine
development and the inherent increased cost of sourcing production from lower grade
ores.”

Goldman Sachs announced a bullish sentiment, expecting prices to rise to $6,200 over
the next six months, or roughly $2.81/lb. Its previous six-month call was $4,800 or
$2.18/lb. The investment bank conceded, “The rally in copper prices over the past two
months was in sharp contrast to our more bearish expectations.” Goldman Sachs is also
expecting a decline in mine supply by 0.4 percent in 2017 compared to a previous
forecast for 1 percent growth. Goldman analyst Max Layton also stated that improved
supply and demand fundamentals contributed to the surge in copper prices, and he
sees it continuing into H1 of 2017.
FocusEconomics’ Consensus Forecast stated that copper has been suffering because
of a glut in the market, and that China’s strengthened economics improved the demand
outlook for copper, and consequently boosted prices. Out of 10 analysts surveyed, all
are taking a “wait-and-see approach”. The December report puts individual forecasts for
Q1 2017 at a lowest of $4,200 per metric ton, and at a maximum of $5,600 per metric
ton. Other price predictions included:
ABN AMRO – $5,600
Macquarie – $5,350
Commerzbank – $5,200
JPMorgan – $4,900
BMO Capital Markets – $4,630
Deutsche Bank – $4,400
Society Generale – $4,200
Industrialization or a glut in the market?
Back in August when Trump was on the campaign trail, Bloomberg reported that his
plan was to rebuild US infrastructure “at least double” the amount that Hillary Clinton
declared, which was estimated at $275 billion over five years.
Rannestad argues that even if Trump indeed fulfilled his promise of increasing
infrastructure spend, it would not have a huge impact on the copper price and will not
take effect next year. She said, “since the US accounts for less than 10% of
consumption per annum. This is not expected to impact the price in the medium term
like it did transiently in November.”
Commerzbank assumes the same outlook position. In a research note sent to investors,
they stated that they see considerable correction in copper’s immediate future, and their
copper price forecast is, “The copper price should therefore settle down above the
$5,000 per ton mark ($2.50/lb) and climb to $5,600 per ton ($2.80/lb) by the end of
2017.”
Investor takeaway
Whether or not Trump makes good on his promise of an increased infrastructure spend,
it seems that copper is up for a better year ahead. Analysts and key industry players

both agree that although a correction in the copper price is imminent, Dr. Copper may
be signalling that the “mining sector is officially out of intensive care.” Certainly,
Goldman Sach’s turn from bearish to bullish on copper speaks volumes on the future of
the red metal as well.
As Ioannou stated, 2017 may see an emergence in supply-demand balance, which
bodes well for copper miners, especially those poised to meet demand from China, the
world’s biggest copper consumer.

Zinc Outlook 2017: A Strong Year Ahead
Analysts predict another great year for the base metal that
reached multi-year highs in 2016.
Zinc was the best-performing LME metal
in 2016, reaching multi-year highs. The
base metal touched a nine-year peak of
$2,985 on November, leading the metals
rally last month.
A growing demand from China and
speculations about the incoming US
president Trump’s infrastructure plans
supported the steepest climb for the metal
since 2009. The speed of the rally was “too fast and too furious” for some analysts
that consider that “there is still correction potential”. However, the metal used to
galvanise steel has gained nearly 90 percent since an over six years low of $1,444.50 in
January.
In 2015, zinc prices struggled, dropping significantly in the last quarter.
But predictions of an imbalanced market, with a strong demand and a tight supply, for
this year were right.
The International Lead and Zinc Study group estimates in their last report that the
market will remain in deficit with a shortage of 248,000 tonnes for 2016.
2017 Zinc Forecast
The base metal seems to have another great year ahead. China, that contributes to
approximately 50 percent of global zinc demand, has applied restrictions for mine
production and will continue to rise its demand supported by government’s policies.
An expected global economic growth throughout next year has also strengthened
investor sentiment. To add to the list, zinc is estimated to have the tightest supply of all
metals, making it an attractive commodity for investors.
Steady demand from China. Steel demand from China has strengthened due to the
government’s push for more infrastructure projects and strong property sales in the top
consumer country.
CLSA analyst Daniel Meng told Reuters: “In the first half of 2017, we will continue to
have very strong steel prices because property sales remain very strong at least till

October and PPP (public-private partnership) program is still in early stage and supply
side should remain controlled.”
But, Oxford Economics commodities analyst Dan Smith was more cautious and said:
“We’re in the midst of Chinese credit boom at the moment, social financing has been
growing strongly in the last few months …(but) I think we’re starting to run
into overbought territory.”
Optimism over global growth. There has been a rotation of funds towards risky assets
supported by expectations of economic growth next year.
UBS analyst Daniel Morgan told Reuters: “The world is looking more like it’s on a
growth footing,” due to a Republican-controlled U.S. Congress and a leadership
reshuffle in China that may lead to policies supportive of growth.
“For those reasons you’ve probably had a big shift in sentiment toward a growth stance
rather than a yield stance,” he said.
Citigroup expects most raw materials to perform strongly next year as global economic
growth picks up. Zinc is amongst its top picks, which it is expected to rise from an
average price of $2,085 a ton over 2016 to an average $2,590 a ton over 2017.
This forecast comes a couple of weeks after Goldman Sachs upgraded its rating on
basic materials to overweight for the first time in four years. The bank also said in a note
on November that it expects zinc to outperform aluminium and copper over the next six
to nine months.
An imbalanced market. Falling mine production could allow the metal rally to continue for
many months. The International Lead and Zinc Study group expects a decrease in zinc
by 5.6 percent to 12.47 million tonnes in 2016 and 5.9 percent to 13.20 million tonnes
next year.
The closure of two main mines in 2015, Century and Lisheen, that together produced
approximately 0.6 million tonnes of mined metal, had a big impact on supply. Production
cuts from other mines, including Glencore (LON:GLEN) and Nyrstar (BRE:NYR) also
allowed prices to soar. To add to the curbed supply, China has recently ordered
the closure of 26 smaller mines due to environmental concerns.
Bloomberg Intelligence analysts said that zinc production will continue to trail
consumption through the years to come.
Glencore (LON:GLEN) CEO Ivan Glasenberg said recently: “tightness is starting to flow
through the entire supply chain and is beginning to reach the metal market.”
He also said that capacity at Glencore’s mines would stay shut until market conditions
meant the extra supply would not push the market lower.

The IZLSG forecasts a global demand increase for refined zinc to rise by a marginal
0.6 percent to 13.57 million tonnes this year followed by a 2.1 percent increase to 13.85
million tonnes in 2017.
George Gero, a managing director at RBC Wealth Management in New York, told
Bloomberg: “You don’t see speculators in zinc, it’s reacting more to physical demand,”
adding that “the increase in canceled warrants is a sign of physical demand.”
Scotiabank noted that “[z]inc continues to be our preferred exposure as we believe that
the metal has the best near-to medium-term fundamentals within the base metals
complex.”
The bank’s recommended companies for the base metal include: Trevali Mining
(TSX: TV), that had over 168 percent gains year-to-date, Pan American Silver
(TSX: PAA), over 157 percent gains year- to-date, Lundin Mining (TSX: LUN), that
reached 85 percent gains year-to-date, and Hudbay Minerals (TSX: HBM), that had
gains of over 75 percent year-to-date.
Investor Takeaway
There is growing optimism and strong sentiment surrounding the zinc market. Looking
forward to next year, it might be a good plan to keep an eye on the base metal, as it is
among top picks from analysts and banks alike. A tight supply, production cuts and a
growing demand may continue to boost prices as the new year begins.

Lithium Outlook 2017: Analysts Weigh In
The Investing News Network spoke with analysts in the lithium
sector about 2016 trends and what's in store for the market in
2017.
The lithium industry has blossomed
significantly over the last couple of years,
and 2016 showed no signs of it slowing
down.
In particular, lithium has unquestionably
emerged as a vital component in the battery
supply, notably in electric vehicles (among
other things). With that in mind, 2017 is poised
to be another interesting year for the market.
Of note, Luke Kissam, CEO of Albemarle (NYSE:ALB) said in an interview with the
Financial Times that lithium demand is expected to soar by 20,000 tons per year until
2021. Lithium supply is also poised to take off as a number of big projects are expected
to start up.
The Investing News Network (INN) reached out to Joe Lowry of Global Lithium, Chris
Berry of House Mountain Partners and the Disruptive Discoveries Journal, and Andrew
Miller of Benchmark Mineral Intelligence on what to look for in 2017.
While the lithium outlook 2017 is exciting, it’s worthwhile to first look at what impacted
the lithium industry in 2016.
2016 lithium themes: price strength and supply crunch
Looking back at the lithium market in 2016, Lowry said that it developed as he
anticipated. In particular, he noted supply continued to be short and prices in China
remained high, “within a fairly narrow price brand,” although prices outside of China
moved up significantly.
“SQM (NYSE:SQM)–as the leader in lithium carbonate supply to the battery industry–
best represents what is happening to price outside China,” he said.
Lowry pointed out that SQM’s lithium carbonate supply has gone up from $6/kg in 2015
to $12/kg in the third quarter of 2016. He commented that “with each passing quarter,” a
new normal for lithium carbonate prfficing outside of China is established.

Berry also expressed his thoughts on the lithium price, saying that the “surprising price
strength really stood out” in 2016.
In that regard, Berry said the question that everyone should be asking is “what is the
new normal for lithium chemicals pricing?”
Miller echoed similar sentiments, saying Benchmark thought there was going to be
some tightness in the market, but not quite the huge jump in prices that were seen.
As it currently stands, it’s no secret that lithium demand outpaces its supply, as noted
above. Prices in China, according to Platts, soared to $25,000 per metric ton in 2016;
long term contract prices of $4,000-$7,000 metric tons are indicative of its undersupply.
Lithium outlook 2017: supply/demand on the rise?
Moving forward on what to expect in 2017, in simple terms Lowry said it “will be
interesting.”
“Demand should grow by at least 15,000-20,000 metric tons,” he suggested.
Simon Moores, managing director of Benchmark Mineral Intelligence, also echoed
sentiments that lithium demand will grow significantly between now and 2020. During
Benchmark’s World Tour 2016 stop in Vancouver, he suggested 100,000-120,000 tons
of lithium will be required to keep balance, most of which he said will come from existing
producers.
On that note, Miller said not to expect much to happen in the lithium sector in the first
half of 2017. He added Benchmark doesn’t really see where new supplies are going to
come from, but that demand is going to continue growing here on out.
“In the later half of 2017, with some of the battery producers trying to secure volumes
for the capacity expansions, we see that being a real turning point for the market and for
battery demand,” he said. “Effectively, you’re not going to see a huge amount of new
supply coming into the market.”
In terms of new lithium supply, Lowry said hopefully the Mt. Cattlin (owned by Galaxy
Resources (ASX:GXY)), and Mt. Marion (jointly owned by Neometals (ASX:NMT),
Mineral Resources (ASX:MIN) and Jiangxi Gangfeng Lithium) projects will have smooth
startups, having missed their 2016 startup dates. Lowry also noted Albemarle’s
LaNegra 2 will begin producing in 2017, but won’t make a big market impact until 2018.
“These projects should help ease the upward price pressure but you should not expect
a rapid drop in price,” Lowry said.
Still, with growing demand for lithium it’s clear that lithium supply will be able to keep up
with it–just not quite in 2017.

With that in mind, electric vehicles will heavily come into play in 2017–and in the coming
years–according to Moores, and lithium-ion megafactories will also continue growing.
Moores added that 75 percent of these factories are–or will be–coming from China.
“Lithium, a key input into batteries, is the obvious beneficiary of the move to electric
vehicles as the mining industry currently appears unlikely to be able to satisfy demand,”
analysts at Investec said in a report, according to the Financial Times.
Factoring in the lithium price, Berry said that prices will remain robust next year.
“I think a long-term price of LCE is comfortably in the $10,000 per ton range, and you
may see prices start to revert somewhat in the second half of 2017,” Berry added.
On the contrary, Miller said they’re waiting to see what will happen with the Chinese
subsidy, as well as electric vehicles, “which could have a big impact on the price.”
Investor takeaway
While supply is expected to ramp up in 2017, Berry said investors should be paying
attention to what the optimal energy metals portfolio looks like, or consists of. He added
that lithium is only one part of it, and that understanding the full supply chain will
become important as time goes on.
“A clear understanding of materials science, and in particular battery materials science
will be vital to your strategy,” he said.
Lowry said that battery producers will look to control their supply chains, so investors
should also watch for direct investments from major battery companies in lithium
suppliers.
Similarly, Miller said Benchmark quite often gets asked on whether or not the lithium
market will be flooded with new raw material, adding they have grown ‘wary’ of that
potentially being the case earlier in the year.
“The question became if this is going to be a more hugely oversupplied market by 2017,
and one thing that’s an upsize to people is these projects aren’t easy to bring onto the
market,” he noted.
With that in mind, investors should be mindful that it will take time for the supply to meet
the lithium sector’s growing demand.
“There’s more steps and more processing that has to take place,” Milelr said. “For that
reason we think the industry’s going to have an issue with expanding its supplies for the
next year.”

Uranium Outlook 2017: Experts Expect a
Slow Recovery
The uranium price dropped to its lowest level in over 12 years in
2016, will 2017 be a bounce-back year for the struggling industry?
Without a doubt, 2016 was one of the
toughest years in recent memory for the
uranium industry, and it’s hard to
imagine it getting any worse than it
already has: in particular, prices dropped
to 12-year lows to $18.75 per pound in
October, and reactors have been slow
coming back online since the 2011
Fukushima disaster.
Of course, a number of companies in the
sector have also felt the ramifications of the low price. Ted O’Connor, CEO of Plateau
Uranium (TSXV:PLU), told the Investing News Network (INN) that “the resource sector
had been in the worst downturn seen in decades at the end of 2016, and we were
seeing classic bottom of market events.”
What’s more, O’Connor added that for the uranium sector, “you can sense the bottom is
here,” which could mean good news for the uranium industry–at least in the long run.
To get some insight and thoughts on the uranium outlook 2017, Chang elaborated with
INN, along with Patrice Bruneton, a consulting geologist with IAEA.
2016 uranium themes: price drop, mine closures and inventory
Despite demand from China potentially doubling to 9,800 metric tons annually by 2020,
the uranium price has no doubt struggled significantly this year. As mentioned, its prices
have dropped to its lowest levels in over 12 years–sitting at $18.75, as of December 12,
2016–which has been surprising.
“We were expecting a price recovery in 2016, but were wrong,” Chang said. “The impact
of the carry trade to satisfy emerging uncovered requirements was much stronger than
anticipated.”
Bruneton agreed with Chang, noting he was not expecting such a fall in the uranium
price.

In that regard, there were, of course, a number of factors contributing to the drastic price
drop. While it’s not unique to 2016 only, FocusEconomics noted in their December
2016 Consensus Forecast Commodities Outlook that the market hasn’t been able to
recover from the Fukushima disaster in 2011.
In terms of supply, the largest miner of uranium in the world, Cameco
(TSX:CCO) announcement in April that it would be halting production at its Rabbit Lake
mine–the longest-running uranium mine in Saskatchewan–has no doubt impacted the
sector. The company had previously set a target for production in 2016 at 30 million
pounds of uranium, which has since changed to 25.8 million pounds.
As we move into 2017 and beyond, the outlook for the uranium market is hopeful.
Chang said Cantor Fitzgerald believes prices will be flat to slightly higher in 2017, as the
carry trade continues to push emerging uncovered demand forward by a year or
two. But, he added, as interest rates rise and increasing percentage of global uranium
requirements become uncovered, there will be a point where the carry trade won’t be
able to satisfy the demand.
“Utilities will be forced to enter into the spot market more aggressively to satisfy their
needs,” Chang said. “This will kick off the violent price increase we have been
expecting.”
On the other hand, FocusEconomics expects the uranium price to pick up in 2017,
averaging $33 per pound in the fourth quarter of 2017.
While it’s not clear when that price kick will happen, what we can anticipate is future
supply keeping up with emerging demand–although it won’t happen just yet. In
November, it was reported that Berkeley Energia (ASX:BKY) has started working on a
$100 million uranium mine, although it isn’t expected to open until 2018. It has a target
production of 4.5 million pounds of uranium per year, and will reportedly be one of the
lowest-cost uranium producers in the world.
What’s more, data from the World Nuclear Association (WNA) points out that there are
440 commercial nuclear power reactors operable in 31 countries, with 60 more under
construction. Of course, it’ll take time before the reactors have any kind of impact on the
uranium industry, but it is hopeful nonetheless.
While positive, Bruneton expects “a very slow to slow” recovery in 2017 and 2018 as a
result of nuclear reactors restarting in Japan, and new ones coming online–mentioned
above.
“But, China has large stocks and several mining projects that are ready to bring large
quantities of uranium into the market,” he noted.

Cameco also projects that uranium demand will increase by 500 million pounds in the
next 10 years for nuclear reactors–supply that hasn’t been contracted out yet–and
Cantor Fitzgerald said up to 80 percent of the uranium market may be uncovered in
terms of supply by 2025.
To that end, while there isn’t much to be expected in 2017, the uranium industry is
poised for a liftoff in the next couple of years–and that is certainly something to look
forward to.
Investor takeaway: eyes on interest rates
In terms of what investors in the uranium sector should pay attention to, Chang said
paying attention to interest rates is key.
“Investors will need to keep their eyes on interest rates, as rising rates will make the
carry trade less attractive and spot market uranium activity,” he said. “Increased
volumes means more utilities are feeling the need to buy in the market.”
Indeed, the uranium market has been flat over the last couple of years, but investors will
be watching how the sector unfolds in 2017; it could be the start of a long overdue
uranium bull run.
Companies to watch
Turning the focus to what companies to watch, Chang noted a few that investors should
keep their eyes on:
• Cameco, he said, as it’s the biggest go to name in the space
• Ur-Energy (TSX:URE), who is the lowest cost publicly traded producer in
the US
• Energy Fuels (TSX:EFR), which has the largest production capacity in the US
• NexGen Energy (TSX:NXE), because Chang said it has one of the best uranium
deposits in the world
• Uranium Participation (TSX:U), as it is a pure play on uranium as a commodity,
Chang said.

Cobalt Outlook 2017: Price Revival
Expectations
Interest in the cobalt market continued to rise in 2016, but what
will happen in the year ahead?
Cobalt prices started to slowly recover
in 2016, and both analysts and CEOs
expect a price revival for next year.
Interest in the cobalt market started to
rise a couple of years ago when Tesla
(NASDAQ:TSLA) announced the opening
of its lithium-ion battery gigafactory.
Cobalt, a raw material needed for these
batteries, is on track for a price surge in
the next few months as the electric car
revolution unfolds.
Prices for cobalt metal COB-CATH-LON are expected to rise above $16 a lb by 2020
from $14.75 at present, as stricter emissions controls boost demand for electric vehicles
and push the market into deficit from this year, analysts said.
Chris Berry, of House Mountain Partners and the Disruptive Discoveries Journal, said:
“Cobalt was finally discovered this year. Cobalt’s price on the LME is up by 25 percent
year-to-date and it looks like other forms of cobalt chemicals have enjoyed similar
strength.”
To add to the rising demand, the market could tighten substantially as political and
human right concerns continue to put the Democratic Republic of Congo, the top
producing country, in the spotlight.
Earlier this year, Amnesty International released a report showing that major tech
companies are not ensuring that their products do not use cobalt mined by child
laborers. In addition, concerns about the presidential election in the country could
compromise cobalt mining operations.

Electric Vehicles: Will the Market Keep Up?
IHS Automotive expects electric vehicles to represent nearly four percent of all light
vehicles worldwide by 2020, equivalent to 3.9 million cars, up from just over 14,000 in
2010.
A rising demand for lithium-ion batteries in these vehicles and other electronic devices
is expected to drive the cobalt market, among other metals, in the next years as
producers will need to secure their raw materials supply.
Benchmark Minerals Intelligence analyst Caspar Rawles said: “The biggest driver at the
moment in the cobalt market is electric vehicles and companies procuring their supply
for the future of the electric vehicle market.”
Last year, only 37 percent of cobalt was consumed in metallurgical applications and
global demand is expected to continue to shift towards non-metallurgical applications.
Consultants CRU Group said electric car and plug-in hybrid vehicle sales could top 17
million in 2030, assuming an average growth rate of 25 percent a year from 2016 to
2030.
CRU’s senior consultant Edward Spencer said: “Demand for cobalt in non-metallurgical
(chemical) uses such as in batteries will grow at more than 7.5 percent a year to 2020,
“Chemical demand growth will be buoyed by the electric vehicle sector growing out of its
infancy and the lithium-ion sector for other applications also growing robustly.”
He sees global cobalt demand at approximately 120,000 tonnes in 2020, whereas
Macquarie analysts see it at 107,000 tonnes. Both, however, forecast similar deficits in
excess of 7,000 tonnes at the end of 2020.
Macquarie analysts said in a note: “Cobalt’s demand growth profile remains one of the
best among industrial metals peers. Its exposure to rechargeable batteries continues to
play a crucial role.”
Lithium-ion-batteries are not only used in electric cars but also in mobile phones,
laptops, digital cameras, cordless drills and hedge trimmers.
According to Benchmark Mineral Intelligence forecasts, three-quarters of lithium-ion
battery cathode capacities are expected to contain some volume of cobalt by 2020, with
NCA and NMC cathodes benefitting from the growth in automotive battery applications.
“This is projected to see significant growth in cobalt consumption from the battery sector
over the coming years – demand which today’s industry appears badly placed to
supply,” they said.

Rawles expects to see some more of the price increases already seen in 2016, “I think
2017 is definitely going to be a busy year for Cobalt. I mean at a distance we’re getting
a lot more interest around Cobalt than we have done historically.”
Human Rights and Environmental Concerns
Another factor stirring up the cobalt market are human rights concerns, after Amnesty
International released a report showing that major tech companies — including Apple
(NASDAQ:AAPL), Samsung (KRX:005930) and Sony (TYO:6758) — were not doing a
good enough job of policing their supply chains and allowing so-called minerals into
their products as a result.
Some reports suggest that this year 60 percent of the world’s cobalt supply will come
from this country, which could be an issue for companies that want full visibility of their
resource supply chain.
“Interest in cobalt has shined a light on its origin and sourcing in the DRC, a region rife
with conflict. With no substantial near-term source of cobalt available in other parts of
the world, the uneasy relationship between sourcing a critical commodity in a
challenging part of the world is set to continue,” Berry said.
The world’s biggest cobalt producer, DRC, mined an estimated 67,735 metric tons of
the material last year and approximately 20 percent of the total mineral is mined by
unregulated, “artisanal” miners. According to a 2014 estimate by UNICEF, about 40,000
of these miners are children.
“This has cast a big spotlight over cobalt at the moment. That with a responsible cobalt
initiative and one thing or another might mean that we see some supply restrictions as
that market changes. I think that’s what causing the change that we’re seeing right
now,” Rawles said.
But Tesla pledged in 2014 to use only North American resources for its battery
production at its Gigafactory and has also claimed that it will stop sourcing its cobalt
from the Philippines this year, due to environmental concerns, which will be a future
issue for cobalt extraction as demand rises.
“The refined cobalt market will fall into a 3,000 tonne deficit this year following seven
years of overcapacity and oversupply. CRU anticipates prices to increase onward into
2017 as global demand for refined cobalt exceeds the 100 kt mark and mine and refined
supply tightens,” Spencer said.
Stormcrow Capital’s Jon Hykaw said that annual global mined production clocked in at
120,000 tonnes, with 53,000 tonnes being used as cathode material. But, “by 2025,
we’re looking at a requirement for cobalt of 121,000 tonnes, which is actually in excess
of all producing cobalt today.”

That, said Hykawy, is “interesting,” particularly in light of the fact that “cobalt is a by-
product.”
About 60 percent of cobalt production is a byproduct of copper and the volatile price of
the red metal is further impacting the supply of cobalt and is leading to specialist
companies entering the market.
China’s Long Game
In addition, the Chinese State Bureau of Material Reserves has increased it’s
stockpiling efforts since the start of 2015 and this is now limiting physical availability on
the market.
This longer-term trend alongside a more recent crackdown by Chinese authorities on
environmental pollution from domestic refiners, has limited available volumes on the
spot market.
“China now owns around 70 percent of the cobalt refinery business and doesn’t produce
much from a mining perspective, but these deals give Chinese companies control of a
more valuable part of the cobalt supply chain,
“Just how much cobalt is in stockpiles in China is the Million Dollar Question. Clarity
here can materially affect the cobalt price,” Berry said.
China Molybdenum announced earlier this year its plans to purchase Freeport
McMoRan’s (NYSE:FCX) interest in its TF Holdings Limited for $2.65 million which was
completed in November, despite efforts by state-owned miner Gecamines to block the
deal.
As early as next year, China could be producing approximately 62 percent of the global
refined cobalt production, increasing its demand by more than two-thirds over the next
decade. This will mean Tesla Motors could find itself heavily relying on China for cobalt
as they aim to increase production of electric cars in the coming years.
“The Chinese are playing the long game to tie up that angle of the battery supply chain,”
Berry added.
Companies to Watch
Earlier this year, Berry told INN that some of the junior cobalt companies that interested
him were Formation Metals, now eCobalt Solutions (TSX:ECS), that had gains of over
350 year-to-date and Global Cobalt (TSXV:GCO) that has been in the cobalt space in
2016.

Investors Takeaway
“Watch copper and nickel prices as sustainable increases here can mean more cobalt
on the market. Major cobalt producers like Glencore will wait for price signals in the
copper market before expanding production capacity there which will directly affect
cobalt production over the longer-term,” Berry said.
He also added that investors should be watching for finances as well as technological
advances in battery chemistry as there is a great deal of financial and intellectual capital
being put towards minimizing cobalt’s use in batteries.
“The real winners in cobalt will be those companies that can harness illiquidity and
volatility in 2017 and beyond,” he said.

Graphite Outlook 2017: Will the Market
Take Off?
A look at the year ahead for the critical metal's market.
It wasn’t a particularly interesting year for
graphite, although the promising growth in
demand from the automotive and battery
industries can stir things up in the upcoming
months.
The graphite demand started to shift in 2014, after
Tesla Motors (NASDAQ:TSLA) announced plans to
build a $5-billion lithium-ion battery gigafactory.
Graphite, in its natural spherical form, is one of the
main raw materials needed to create these batteries
as each one requires 10 to 20 times more graphite than lithium.
In an interview with the Investing News Network (INN), Benchmark Mineral Intelligence
analyst Andrew Miller said, “Where we are today in the graphite market is pretty much
where we were 12 months ago on prices.”
“But the interesting thing about where we are now compared to where we were more
than a year ago is we are getting a bit closer to seeing growth from the battery sector
again,” he added. “It’s going to be the growth in value-added grades and using flake
graphite value-added grades which drives the market going forward.”
By the end of 2016, global sales of graphite are estimated to be valued at US$ 14,690
millions, a nine percent increase year on year over 2015.
Graphite in 2017
As 2016 draws to a close, forecast for the graphite market in the long term remains
positive. A report by Persistence Market Research shows that the global market–valued
at $13.62 billion in 2013–is expected to reach $17.56 billion in 2020.
Still, there are some concerns about an oversupply and expensive costs for mine
extraction that may keep the prices low. Here are the main factors to look at in 2017.

Electric Cars and Lithium-Ion Batteries. IHS Automotive expects electric vehicles to
represent nearly four percent of all light vehicles worldwide by 2020, equivalent to 3.9
million cars, up from just over 14,000 in 2010.
A rising demand for lithium-ion batteries in these vehicles and other electronic devices
is predicted to significantly drive growth of graphite, the second-largest component in
the batteries, in the years to come.
“It’s certainly the battery side of things that has the biggest market growth. That will be a
growth market for graphite,” Miller said.
Tesla hopes to build between 80,000 and 90,000 electric vehicles in 2016, with 50,000
being produced in the second half of the year. To add to the rising demand, China’s
government plans to have around 5 million battery-electric vehicles on the roads by
2020.
“We believe the lithium-ion battery anode market could grow to at least 250,000 tonnes
by end-2020,” Simon Moores, managing director of Benchmark Mineral Intelligence, told
INN.
Gigafactories. Tesla’s gigafactory in Nevada is expected to start production by 2017.
In 2021, based on Tesla manufacturing 150,000 Model 3 units, Benchmark estimates
that the company will consume 10,800 tonnes of spherical graphite for its anodes, 15
percent of the world’s spherical graphite consumption in 2015.
With that being said, natural graphite demand is expected to increase by up to 37
percent by 2020.
“As we approach the start up in these big megafactories, they are going to have to start
tying their raw materials and tying their anode and cathode suppliers,” Miller said. “It
would be interesting to see how those markets are able to respond to those
developments and demands.”
The Asia Pacific region. Asia Pacific is the largest market for graphite globally and, in
2016, the region’s global revenue share is forecast to be 35.5 percent.
Tesla’s plans stirred up predictions in the industry, but analysts continue to see China
as the main factor shifting the demand in the industry.
“If you visit China and speak to these lithium-ion battery producers–something we do at
Benchmark–then you realise how much growth the companies are planning for.
“China is forcing change in the industry. It’s not just about Tesla and its huge
gigafactory: over 70 percent of new lithium ion demand is coming from China,” Moore
said.

A rise of technologically advanced applications of graphite in pebble-bed nuclear
reactors, fuel cells, solar power systems, and automotive and aerospace industries is
driving the graphite market in this region.
Will Prices Increase?
There is a high cost of extraction for graphite which increases the cost of the critical
metal that could slow the growth of the market.
Asbury Carbons CEO Stephen Riddle said he expects prices to continue to decline as
new capacity is being added to an oversupplied market.
But for Miller, prices for flake graphite seemed to have reached their bottom, as he
doesn’t expect any more declines, what he is now expecting is a price recovery that will
happen in the long term.
He forecasts an emergence of the flake graphite concentrate and the valued-added
grades in 2017.
“The industry has to develop a little bit more in terms of demand for those prices to
really pick up over the next year. Whether that will happen or not is debatable, but
certainly in the next few months we don’t see any immediate rebounds,” he said.
Miller said that there are a number of companies across Canada and Australia that
investors should be watching in 2017 such as Australian Syrah Resources (ASX:SYR),
with their Mozambique Balama Project, and Bass Metals’(ASX:BSM) Graphmada
project in Madagascar.
Another project to keep an eye on is the joint venture between Imerys Graphite &
Carbon and Gecko Namibia to develop the Okanjande project.
Investor Takeaway
Investors may be asking themselves, “what is the best project to be looking at?” For
Miller, the simple answer to that is there is no one best project.
“We certainly see that on the side, companies are going to have to serve multiple
markets,” he added. “No one project or company is going to want to put all of its
material into one market like batteries, so you need a number of different consumers on
board to make an economically feasible project.”
The graphite market is complex, as there are many types and applications for the critical
metal. But the main factor to watch out for in the next years will be the production of

electric vehicles as most companies will aim at producing and selling to lithium-ion
battery makers. Investors should pay attention at how this market develops as a lift off
of graphite prices may be just around the corner.

Cannabis Outlook 2017: Legalization on
the Horizon
The Cannabis industry soared in 2016 in the US and Canada.
Here's an outlook for what's in store for the market in 2017.
It goes without saying that the cannabis
industry reached a new high point in 2016.
The US voting in favor of legalization (in four
states) on November 8, and the Canadian
government releasing its task force for
recreational use of marijuana on December
13 were certainly two of the year’s biggest
moments.
Looking ahead, there is indeed a lot to look
forward to in the cannabis sector that goes beyond 2017’s expectations. For
starters, the cannabis market was expected to jump over $6.7 billion in the US during
2016, and it’s only expected to increase from there. By 2020, cannabis sales in the US
are expected to grow to $21.8 billion.
The story is similar in Canada: according to the Globe and Mail, there are currently 26
marijuana stocks listed in Canada–which has helped the industry soar from almost
nothing a few years ago to $4 billion in 2016. What’s more, a report by Forbes.com
estimates that the cannabidiol market will grow to $2.1 billion by 2020.
As such, the Investing News Network (INN) had the chance to speak with Alan
Brochstein of 420 Investor to get an idea of how the cannabis industry is shaping up in
2017.
Cannabis outlook 2017: legalization in Canada
In Canada, anticipation of the federal government legalizing recreational use of
marijuana sometime in the spring of 2017 is no doubt at the forefront of what to look
forward to come the new year. As previously mentioned, the Canadian government
released its task force laying out the guidelines for its legalization.
When speaking with INN about the guidelines, Brochstein said “it’s very obvious”
Canada is set to legalize, but that it’s still a little unclear about it it looks like, or what the
time frame will actually be.

“Any time we get updates like this, I think a lot of people like to spin it positively,” he
said.
In an interview with the Globe and Mail, Ryan Modesto, managing partner at 5i
Research, advised that the recommendations could potentially not be approved.
“While I am sure the government will take them very seriously, it doesn’t necessarily
mean they have to listen to anything that’s there,” he told the publication.
Still–some Canadian cannabis companies have given their seal of approval regarding
the task force’s guidelines.
Bruce Linton, CEO of Canopy Growth (TSX:CGC), said in a press release that the
report is “good news” for Canadians, which provides a “strong policy framework for the
government to consider.”
However, Linton expressed concerns that the task force is recommending no separate
tax regime for medical and recreational sales.
“A path forward to insurance coverage must also remain a top priority for Canadian
policymakers. Cannabis access can only truly be achieved if barriers to affordability are
removed,” he said.
Terry Booth, CEO of Aurora Cannabis (TSXV:ACB) expressed similar sentiments
regarding the task force in a separate press release. Booth said the company is “very
pleased” by many of the recommendations made, which includes maintaining a
separate medical access framework for patients.
“We also support the report’s comment with regard to the need for federally supported
research into the use of cannabis and cannabinoids for medical purposes, with the
explicit aim of facilitating their market authorization as drugs,” he said in the release.
To that end, Cam Battley, executive vice president of Aurora, said in an interview with
INN that 2017 is going to be “another enormous year” for the cannabis industry. In
addition to his role as executive vice president with Aurora, Battley is a member of the
Board of Directors of Cannabis Canada.
“We are working closely with the government to ensure that the legalization of cannabis
is done in a careful, appropriate and sustainable manner that protects public health,
public safety and is good for consumers and also good from a business perspective,” he
said.
Cannabis outlook 2017: uncertainty in the US
Looking at what the market will look like in the US next year, there’s still doubt with
respect to what legalization will look like under a Donald Trump presidency.

James Dines, who publishes over at The Dines Letter, said in an interview with INN that
the ramifications of Trump’s victory “have not actually been felt.”
“Something big is going to happen,” he said. “I think there will be a big shakeup in the
American economy, and that of course impacts the world. I think Trump’s victory was a
seminal event and I think that is going to have ramifications to everybody.”
Brochstein, however, said that his “crystal ball” is cloudy due to the absence on the
federal policy towards enforcement of the Controlled Substance Act in the US that have
legalized cannabis.
“I am optimistic that the medical cannabis market will be just fine, but I am concerned
that the federal government could interfere with states with respect to adult use,” he
said.
And it’s easy to see why: Jeff Sessions, the attorney general appointed by Donald
Trump has made no secret about his opinions on marijuana. At a Senate hearing in
April, as reported by the Washington Post, Sessions said, ““We need grown-ups in
charge in Washington saying marijuana is not the kind of thing that ought to be
legalized, it ought to be minimized, that it is in fact a very real danger. You can see the
accidents, traffic deaths related to marijuana.”
According to Haaretz, Sessions has also made the comments that “good people don’t
smoke marijuana,” and that the Ku Klux Klan were “OK until I found out they smoked
pot.”
That being said, CNBC commented “battling the cannabis industry could be political
suicide, given the victories on election day.” The publication also notes that Pew
Research found that 57 percent of adults in the US are in favor of legalized marijuana.
On that note, republican states such as Florida, Ohio and Pennsylvania all approved
cannabis legalization in 2016. CNBC said it seems “unlikely” that Trump would spend
“substantial political capital battling the legalization trend.”
What this means, is that on a political and economic front, it’s suggested that Trump
won’t increase enforcement or back down on the government’s current policy. “Instead,
the status quo will likely persist, meaning the growth of the industry should continue,”
CNBC suggests.
Investor takeaway
In terms of legalization of marijuana in Canada, Brochstein said while it is anticipated for
2017, he suggested sales of marijuana shouldn’t be expected until 2018.
“Between now and then, there’s not a lot for investors to go on except for what’s going
on in the medical market, which remains pretty positive,” he noted.

In the US, however, he said what will likely set the tone for the market will be the federal
policy on CSA enforcement.
“Unless there is some sort of draconian response, I think that the huge momentum from
the new States coming on line will lead to bullish sentiment for the industry and perhaps
the public stocks,” he said.
No matter which way you look at it, there are exciting times ahead of the cannabis
industry–in Canada and the US–and investors will be sure to keep their eyes open on
the growing industry in the coming year.

Oil and Gas Outlook 2017: OPEC vs.
Trump
OPEC's recent agreement and incoming US president Trump's
uncertain policies will impact oil and gas next year, so what are
the predictions for 2017?
Oil and natural gas prices have been on
the rebound in the last months of the
year. Both commodities had a rocky start
of 2016, as oil hit a low of $27 per barrel
and natural gas dropped to an 18-year low
of $1.57 per million British thermal unit.
But in November, after the Organization of
Petroleum Exporting Countries agreed to cut
production for the first time in eight years, oil prices surged to a 17-month high to $52.83
per barrel.
For natural gas, the turnaround happened on December, when the Henry Hub natural
gas spot prices rose to a two-year high of $3.72 per million Btu, supported by cold
weather conditions.
The Energy Information Agency forecasts Brent crude oil prices to average $43 pb in
2016 but to be up to $52 pb in 2017. The Henry Hub gas spot prices are estimated to
rise from an average of $2.49 in 2016 to $3.27 in 2017.
Production Cuts: OPEC’s Deal
After months of discussions, OPEC reached an agreement to curb production for
the first time in eight years. The output is expected to be cut by 1.2 million barrels per
day starting in the new year. In addition, several non-member countries, including
Russia, pledged to reduce their production by roughly 560,000 barrels per day for the
first six months of 2017.
But the latest oil production data from EIA showed US production increased by 9,000
barrels a day to 8.7 million barrels for the week ended November 25.
“For contractual and logistical reasons, we might initially see that the output cuts do not
fall neatly into place,

“The deal is for six months and we should allow time for it to be implemented before re-
assessing our market outlook. Success means the reinforcement of prices and revenue
stability for producers after two difficult years; failure risks starting a fourth year of stock
builds and a possible return to lower prices,” the IEA added.
For natural gas, the EIA forecast production to average 77.5 billion cubic feet per day
(Bcf/d) in 2016, a 1.3 Bcf/d decline from the 2015 level, which would be the first annual
production decline since 2005. Next year, output is predicted to increase by an average
of 2.5 Bcf/d from the 2016 level.
But production could potentially rise, as the incoming US President Trump’s policies are
uncertain and could threaten the capacity of OPEC to set oil prices. Iran, that has been
exempted of OPEC’s deal, could also rise production, working against the global supply
glut. In addition, it may take longer to lower the massive buildup of crude oil and refined
product inventories.
“Any increased oil production in the U.S. could limit further gains in natural gas prices,
as it would likely increase oil-associated natural gas production, which accounts for
about 20 percent of domestic supply,” Michael Roomberg, who helps manage $7.5
billion at Miller Howard Investments Inc. in Woodstock, New York, said to Bloomberg.
Uncertainty: Trump and the Weather
During his campaign, Trump promised to bring an energy revolution, expecting that the
oil and natural gas industry could lead to the creation of “another 400,000 new jobs per
year”. He has also proposed to end energy regulations and said that they are hurting
economic growth.
“I will cancel job-killing restrictions on the production of American energy, including
shale energy and clean coal, creating many millions of high-paying jobs,” said
President-elect Donald Trump.
Bank of America Merrill Lynch’s, head of global commodities and derivatives research,
said to CNBC: “So now OPEC has to deal with a rising threat of more supply from the
U.S. at a lower cost, because that’s what lower regulatory hurdles mean for supply in
this country,”
Another factor to consider is a rising US Dollar, that has reached multi-year highs
following the US presidential election, as there are expectations of economic expansion
in the next few months. A stronger dollar pressures demand for dollar-denominated
crude, making barrels more expensive for users of other currencies.
In addition, forecasts of colder temperatures than last winter contributed to EIA’s
projection of a 13 percent year-over-year increase in residential and commercial natural
gas consumption from December 2016 through March 2017.

But Citi analysts warned that temperatures at the beginning of winter aren’t always a
dependable signal for the coming months. “We caution against extrapolating current
weather patterns too far into the future,” the bank said in a research report.
Companies to Watch
Goldman Sachs analysts said in a research report that the following companies are their
favorite U.S. exploration and production stocks to start 2017. EOG Resources
(NYSE:EOG), Diamondback Energy (NASDAQ:FANG), Hess (NYSE:HES), Range
Resources (NYSE:RRC).
They have also recently added Southwestern Energy (NYSE:SWN) as a top stock to
watch in the winter months.
Analysts at JP Morgan suggested to watch Anadarko Petroleum (NYSE: APC), Devon
Energy (NYSE:DVN), Range Resources (NYSE:RRC), and Pioneer Natural Resources
(NYSE:PXD).
Investor Takeaway
Looking at the year ahead, investors interested in the oil and gas market should pay
attention at how decisions made this year develop in the next few months. OPEC
reached a historic deal, supported by non-members, but there are still doubts as to
whether all countries will comply with the set targets.
Trump’s policies are still uncertain, and a stronger US dollar may drive oil prices higher
than expected while impacting the natural gas market. Still, analysts and banks predict
that oil prices will surge next year, and that a turnaround from oversupply to deficit in the
natural gas market is always possible.

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