{"id":1153,"date":"2024-02-16T12:59:45","date_gmt":"2024-02-16T12:59:45","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/16\/how-is-the-smart-money-investing-in-mining-today\/"},"modified":"2024-02-16T12:59:45","modified_gmt":"2024-02-16T12:59:45","slug":"how-is-the-smart-money-investing-in-mining-today","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/16\/how-is-the-smart-money-investing-in-mining-today\/","title":{"rendered":"How is the Smart Money Investing in Mining Today?"},"content":{"rendered":"

The resource industry has long been seen as risky for investors. Filled with juniors looking to make a name for themselves with a discovery, the sector offers diversification, but isn\u2019t necessarily for the faint of heart.<\/strong><\/p>\n

There have been some notable winners over the years, but for the last decade or so most generalist investors have stayed away from mining stocks. This is despite an increasing number of commodities hitting record-high prices or coming close to record-high prices in the relatively recent past, including gold, copper and zinc.<\/p>\n

At this year\u2019s Vancouver Resource Investment Conference (VRIC), Jay Martin, president and CEO of Cambridge House International, convened a panel to explore where the smartest plays in the mining sector are right now. <\/p>\n

His guests for the event were Adrian Day, president of Adrian Day Asset Management; Willem Middelkoop, founder of the Commodity Discovery Fund; and Rick Rule, proprietor at Rule Investment Media.<\/p>\n

\n

Is the bottom in for mining stocks? <\/h3>\n

Although prices for base and precious metals have been elevated over the last several years, this hasn\u2019t translated into much interest in mining equities from new investors.<\/p>\n

Quite the opposite \u2014 during the two days of VRIC, many participants noted that mining stocks are undervalued. <\/p>\n

Against that backdrop, Middelkoop sees strong opportunities. \u201cWe\u2019ve already reached the bottom. I see a lot of bottoming patterns also in the charts. If you study the markets from a supply and demand perspective, from a fundamental perspective, there are certainly shortages arising. Uranium is a great example \u2014 we have some kind of short squeeze, and this could develop into copper, silver or other metals. There are great bargains to be found,\u201d he said.<\/p>\n

Speaking about gold, Day said he sees the smart money moving into the senior companies first. <\/p>\n

\u201cWhen the gold stocks start to move, it\u2019ll be the big-cap stocks that move first. Not only do they move first, (but) they\u2019re more certain to move,\u201d he said. Day suggested that if gold were to reach a price point of US$2,500 per ounce, companies like Agnico Eagle Mines (TSX:AEM,NYSE:AEM), Barrick Gold (TSX:ABX,NYSE:GOLD), Franco-Nevada (TSX:FNV,NYSE:FNV) and Wheaton Precious Metals (TSX:WPM,NYSE:WPM) are all but certain to rise. <\/p>\n

At the same time, Day emphasized that he doesn\u2019t want to diminish juniors \u2014 he sees incredible value, but his strategy is more focused on the companies that have cashflow and strong balance sheets, and for him those are the seniors.<\/p>\n<\/div>\n

\n

Strategies for uranium as price takes off <\/h3>\n

Noting a particular focus on uranium at this year\u2019s edition of VRIC, Martin moved the discussion along to gauge the panelists\u2019 thoughts on the energy mineral, which is currently above US$100 per pound. <\/p>\n

Rule was quick to answer with his belief that the \u2018easy money\u2019 has already been made, but also said there is still \u2018big money\u2019 to be generated in the sector. In his view, the market was bound to improve. When the breakeven point for uranium companies was US$60 and it was being sold for US$20, something had to change. <\/p>\n

\u201cAt US$100, the price doesn\u2019t have to go up. It\u2019s a strange mark on human cognitive ability that when the price has to go up nobody cares, but when it has gone up everybody cares,\u201d said Rule. <\/p>\n

Adding to Rule\u2019s point, Middlekoop spoke to the fundamentals of the uranium market. <\/p>\n

\u201cThe last real bull market was around 2007, and then we reached US$140. In today\u2019s money, that would be well over US$200. So I think we are in the very early stages of a bull market in uranium,\u201d he said. <\/p>\n

Diving deeper, Middelkoop sees a serious uranium shortfall coming, and no easy solution for demand, all set against a tense geopolitical backdrop that could continue to drive the price higher. This is setting up a good scenario for investors who have been waiting on the sidelines, but Middelkoop also suggested that investors not wait too long.<\/p>\n

Focusing on discoveries, he said, \u201cIf you look at the best uranium discovery, it has to be NexGen Energy (TSX:NXE,NYSE:NXE). It seems a bit expensive now because it ran up to C$10 \u2014 that\u2019s a C$4 billion market cap now \u2014 but if you do the math with these numbers, once NexGen Energy is in production they will produce 20 percent of all uranium worldwide, and this could be a C$30 to C$40 stock.\u201d<\/p>\n

As a counterpoint, Day urged caution, although he conceded that the wait for uranium to take off has been long. \u201cI\u2019ve been in this business a long time, and when people start asking me if the train is about to leave the station, you\u2019ve got to jump on now before you miss it. That typically is a warning flag, to be honest,\u201d he said.<\/p>\n<\/div>\n

\n

How to evaluate mining stocks <\/h3>\n

There are many ways to evaluate investment opportunities, and the panelists shared some of their best tips. <\/p>\n

For his part, Rule said his focus has always been a people-first approach. \u201cThere is 1 percent of the population in junior mining that delivers 40 percent of the return. So you start hanging out with them,\u201d he said.<\/p>\n

The first thing he suggested is to get to know the people, then look at the scale of what they are finding.<\/p>\n

\u201cGreat big deposits always give you surprises, and the surprises are always good. Little deposits give you surprises and they\u2019re mostly not so good,\u2019 he told the audience at VRIC. <\/p>\n

Finally, Rule encouraged investors to get to know their holdings. \u201cIf the people in the audience here would spend one hour per month for each holding in their portfolio, and the attention to balance sheets, income statements, insider filings, reserve reports \u2026 they would improve their investment performance manyfold,\u201d he said.<\/p>\n

Finding himself in disagreement with the people-first strategy, Middelkoop put the quality of the discovery first. He appreciates the science and the definitiveness of drill results, and gave the example of Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF) Founder Robert Friedland, who didn\u2019t have a good reputation at the start of his career.<\/p>\n

\u201cHe only built himself a great name because he was involved with a great discovery, and he believed that very well and sold it for $4.6 billion. So management can be changed when there\u2019s a strong, quality discovery,\u201d said Middelkoop, adding, \u201cYou can\u2019t change the rocks, you can change management. So that\u2019s why we follow the best discoveries out there.\u201d<\/p>\n

Day finished by noting, \u201cGive me a good person with some money and if a project doesn\u2019t work they\u2019ll go on and do something else, but a bad person with no money can screw up a good project really easily.\u2019<\/p>\n<\/div>\n

\n

Investor takeaway <\/h3>\n

Rule, Middelkoop and Day have different strategies when it comes to investing, and it\u2019s important for investors to establish their own set of rules. One key principle is to have a reason for making an investment. <\/p>\n

\u201cToo many speculators are narrative-oriented. Their idea of due diligence is, \u2018You got a hunch, you got a bunch,\u2019 and that doesn\u2019t work,\u201d Rule said. His statement is worth paying attention to \u2014 going into an investment on a hunch is going into an investment blind. Instead focus on data and certainly don\u2019t be afraid to ask questions.<\/p>\n

Investing in the resource sector has risks, and the juniors are the highest-risk segment of all.<\/p>\n<\/div>\n

Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.<\/strong><\/p>\n<\/p>\n

This post appeared first on investingnews.com<\/div>\n","protected":false},"excerpt":{"rendered":"

The resource industry has long been seen as risky for investors. Filled with juniors looking to make a name for themselves with a discovery, the sector offers diversification, but isn\u2019t necessarily for the faint of heart. There have been some notable winners over the years, but for the last decade or so most generalist investors […]<\/p>\n","protected":false},"author":0,"featured_media":1154,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1153","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/1153","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=1153"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/1153\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/1154"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=1153"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=1153"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=1153"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}