Recall I hold to the view that 'industry sector executives and operators' are worth paying attention to as they have 'feet on the street' and 'day over day' experience and detailed knowledge that financial analysts and financial advisors typically in my experience do not have.

It follows that I think it important to focus on what Gold Fields has just said in its 2012 annual review with respect to issues that challenged gold miners last year, and will in all probability continue to challenged them in 2013. These, in order of priority as I see things, are:

• according to Gold Fields, "the gold mining sector is not delivering optimal leverage over the gold price to investors" in circumstances where Exchange Traded Funds (ETF's) provide direct access to 'gold price upside' without the attendant exploration, development and mining risks related to extraction and production;

• ongoing capital and operating cost pressures. In this regard Deutsche Bank apparently has estimated that cost inflation has averaged 5% - 7% annually since the early 2000's, and was 10% - 15% in 2011. This trend is not expected to abate going forward. That said, you might want to read The silver lining of mining's cloud published March 29 where it is suggested that key mining supplies are becoming cheaper as large projects have been cancelled. That said, it strikes me as unlikely the 'cost increase tide' will turn going forward as mining projects require large capital and operating expense outlays, in circumstances where there is substantive 'sustaining capital reinvestment' (i.e. equipment 'wear and tear' that requires continual repair and maintenance expense and replacement);

• escalating resource nationalism (country risk) in both traditional and non-traditional jurisdictions "has the potential to introduce operational uncertainties and delay, escalate project costs, render project development or production targets unfeasible, and may even result in a loss of ownership or control"; and,

• people skills shortages at a time of significant demographic challenges as a significant number of people with the greatest mine management and technical skills are becoming eligible for retirement.

It seems to me the foregoing issues, all of which I have focused on multiple times in this Newsletter, clearly point to the following important things for traders and investors interested in resources stocks:

• the foregoing four points, while clearly relevant to the gold sector, are equally relevant to the base metals sectors, the silver sector, and all other resource extraction sectors including oil & gas;

• there is risk in the financial markets generally in times of 'normal' macro-economic conditions - i.e. stable and meaningful economic growth on both a world and country-specific basis. Currently it is hard to imagine our current world macro-economic condition to be 'normal', unless one assumes the current macro-economic condition to be a 'new' and generally more risky and volatile 'normal' from here;

• alternate resource investment vehicles that sidestep resource company operating and related cost escalation risks, permitting and operating cost escalation risks, jurisdictional (country) risks, and skills shortages risks all point to likely reduced resource supplies going forward as 'financing for new projects' is likely to become ever more difficult and more expensive. While this is likely to increase the price of resources (be it copper, gold, oil & gas, rare earths, silver, etc.) trading and investing in the sector will require both careful research and a clear understanding of both operating and jurisdictional risks;

• from my perspective, this means that the most attractive resource stocks are likely to prove to be well-financed smaller companies with high-grade reserves and resources in the safest of jurisdictions;

• I increasingly think I am seeing both the mining and oil & gas sectors 'in transition' toward (particularly in the case of the mining sector) more realistic and better understood (by financial market participants) risk profiles, improved corporate governance, and increased (with attendant positives and negatives) regulatory interference; and,

• leaves me with an enthusiasm for finding the 'right horses to ride' in both the mining and oil & gas sectors, but a view that the opportunity in these sectors will be substantively greater for knowledgeable and sophisticated traders and investors than it will be for those who don't do their own due diligence and place reliance on others and then 'go to Las Vegas' without getting on an airplane.

Topical Reference: Gold Fields Integrated Annual Review 2012, from Gold Fields - 212 page PDF, reading time 'as long as you want'. Also read:

• 6 challenges facing the gold sector - Gold Fields, from Mineweb, Geoff Candy, March 29, 2013 - reading time 3 minutes; and,

• The silver lining of mining's cloud, from The Globe and Mail, Pav Jordan, March 29, 2013 - reading time 4 minutes.