Sustainable Arctic Development
Scott Minerd Chairman of Investments and Global Chief Investment Officer
October 2014
What is the opportunity in the Arctic?
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The Arctic spans eight nations.
Source: UNEP/GRID-Arendal
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The Arctic is an emerging market in a stable business environment. 2013 Ease of Doing Business Index (1=Best)
140
120
100
80
60
40
20
0 Arctic Average
Developed Market Average
China
Emerging Market Average
Brazil
India
Source: World Bank. Data as of 9/12/2014
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The Arctic contains 22% of the world’s undiscovered oil and gas. Worldwide Undiscovered Oil and Natural Gas
Oil
Natural Gas
Arctic 13% Arctic 30%
Rest of World 87%
Rest of World 70%
Source: USGS, Guggenheim Investments.
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The Arctic is already a major mineral producer. Arctic Share of Global Mineral Extraction
45% 40% 40%
35%
30% 26%
25%
25% 22% 20% 20% 15% 15% 11%
10%
10%
9%
5%
0% Palladium
Gem stones
Rare Earth Elements
Nickel
Diamonds
Platinum
Cobalt
Zinc
Tungsten
Source: The Coming Arctic Boom, Scott Borgerson (2013), IISS, Schroders, Guggenheim Investments.
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New shipping routes make that wealth accessible.
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As ice in the Arctic Sea melts‌ September Average Sea Ice Extent
9.0M
8.0M
sq. km
7.0M
6.0M
5.0M
4.0M
3.0M 1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: National Snow and Ice Data Center
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‌it opens the possibility for a surge in Arctic shipping traffic. Projected Traffic Along the Northern Sea Route
Transit
100
CAGR = 6.5% The Northern Sea Route - East The Northern Sea Route - West
80
Million Tonnes
From Murmansk to Northern Sea Route's Starting Point 60
40
20
0 2016
2020
2030
Source: The Issues and Prospects of an Expanded Arctic Transportation Network, Alexei Konovalov (2012)
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The Northern Sea Route offers substantial time savings. Distances and Days Saved from Kirkenes (Norway) and Murmansk (Russia)
Destination
Through Northern Sea Route
Via Suez Canal
Days Saved
Distance, Nm
Speed (Knots)
Days
Distance, Nm
Speed (Knots)
Days
Shanghai, China
12,050
14.0
37
6,500
12.9
21
16
Busan, Korea
12,400
14.0
38
6,050
12.9
19.5
18.5
Yokohama, Japan
12,730
14.0
39
5,750
12.9
18.5
20.5
Source: Tschudi Shipping Company A/S, cited in Lloyd’s, “Arctic Opening: Opportunity and Risk in the High North”.
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What needs to happen now?
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Infrastructure along shipping routes would support growing commerce.
Source: The Arctic Institute
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Some of the Arctic’s most pressing infrastructure needs include… Roads
Railways
Airports
Ports
Pipelines
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What needs to happen next?
Enhance scientific and technical understanding
Prioritize sustainable development
Promote international cooperation
Develop Arctic infrastructure
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Disclosures and Legal Notice Guggenheim Investments represents the following affiliated investment management businesses: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Aviation, Guggenheim Real Estate, LLC, Transparent Value Advisors, LLC, GS GAMMA Advisors, LLC, Guggenheim Partners Europe Limited and Guggenheim Partners India Management. This material herein is for informational purposes only and should not be considered as investing advice or a recommendation of any particular security, strategy or investment product. No representation or warranty is made by Guggenheim Investments or any of their related entities or affiliates as to the sufficiency, relevance, importance, appropriateness, completeness, or comprehensiveness of the market data, information or summaries contained herein for any specific purpose. The views expressed herein are subject to change based on market and other conditions. The opinions expressed may differ from those of other entities affiliated with Guggenheim Investments that use different investment philosophies. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Š2014 Guggenheim Partners, LLC. No part of this presentation may be reproduced in any form, or referred to in any other publication, without express written permission of Guggenheim Partners, LLC.
Guggenheim Partners
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