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Evolving Themes: Global Mining

Sector positioning

SHAWN REYNOLDS: Right now, the overall mining exposure in the fund [Van Eck Global Hard Assets Fund] is not that great.  It's probably less than it is historically.  But we do see the theme on the mining sector really unfolding over the next several years, and it's something that we're monitoring very closely and see a lot of great opportunities in the very near future.

Strategic restructuring

REYNOLDS: There's been a big transition in the mining sector over the last year or so, and pretty much every major mining company in the world has had a new CEO, a new CFO, or a new COO, and that goes really across the board. There's something like 65 different management changes in the industry over the last 12 months. That's really changing the strategy.

The strategy for the last several years has been really all about growth – and in some cases growth at any cost.  The new paradigm shift is really focused on expense reduction, margins, returns, and eventually getting to a higher value and higher valuation. That's really going to be driven by a couple of things. First is focusing on expenses and getting operating expenses and overhead expenses down. You might call the low-hanging fruit.  And then there's the second phase, which is to focus on better investments in terms of maintenance, cap-ex, and just high-grading what you're doing and the assets that you have today.  That should really end up helping your returns and eventually your valuation.  The final phase is cutting back on cap-ex. Cap-ex has been blowing out over the last 10 or 15 years.

Van Eck's Views On Global Supply/Demand Dynamics

REYNOLDS: Now you're seeing a significant reduction in the amount of investment that the mining companies are making and that will eventually lead to lower supply. We look maybe two to five years out and we see a lot of these commodities – their supply-demand balance – start getting tighter and eventually leading to higher prices. That would be the third phase that would really help the entire industry.  We would also expect to see a little valuation improvement on the back of that.

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Sean Reynolds is the Portfolio Manager of Van Eck Global’s actively managed mutual fund Van Eck Global Hard Assets Fund and is not involved in the portfolio management of Van Eck’s passively managed Market Vectors ETFs.

Important disclosure for Van Eck Global Hard Assets Investors:  You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with concentrating its investments in hard assets and the hard assets sector, including real estate, precious metals and natural resources, and can be significantly affected by events relating to these industries, including international political and economic developments, inflation, and other factors. The Fund’s portfolio securities may experience substantial price fluctuations as a result of these factors, and may move independently of the trends of industrialized companies. The Fund’s investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, including the takeover of property without adequate compensation or imposition of prohibitive taxation. The Fund is subject to risks associated with investments in debt securities, derivatives, commodity-linked instruments, illiquid securities, asset-backed securities and CMOs. The Fund is also subject to inflation risk, short-sales risk, market risk, non-diversification risk, leverage risk, credit risk and counterparty risk. Please see the prospectus for information on these and other risk considerations.

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