Pezim convinced of VSE’s place as a much-needed high risk capital

Despite a nasty head cold that seemed to make his normally gruff voice even more gravelly, Murray Pezim, chairman of Prime Resources (VSE), offered The Northern Miner his insights into the future of the Vancouver Stock Exchange and the junior resource community. “No matter what anyone says, the VSE will always be here,” he said in his spacious office on the top floor of the Prime Capital building. Citing Las Vegas as a prime example, Pezim explained that people will always want to speculate. “They’ll just keep building hotels there.”

Pezim scoffs at the bad-mouthing the Exchange has received of late. “Far more money has been made on this exchange than lost,” he said, citing Hemlo Gold Mines and Corona as examples of large capital companies that had their roots in the VSE. “At least you know what you’re getting into here.”

Pezim explained that an investor could easily lose a fortune on the New York Stock Exchange with junk bonds “by not realizing how speculative they are.” And he described the VSE as an “angel” compared with the NYSE.

Pezim’s view of the economy calls for some softening in the near future, but no recession. He notes interest rates will come down — “they have to,” he said — but views the market in New York as still being somewhat high and sees it dropping to the 2,300-level within the next six months.

Asked about the prospects for The Toronto Stock Exchange, Pezim said he didn’t even watch it.

“It just follows the NYSE anyway,” he said.

But Pezim is extremely bullish on the VSE, and he predicts volumes far in excess of those seen last year. The primary reason for his optimism is his positive outlook for the price of gold and the prospects for the Eskay Creek/Iskut River area of northwestern British Columbia.

“I know of 42 companies drilling up there this season and we expect to see up to 3,000 people working in the area,” he said. “There are bound to be other finds.”

Pezim also believes the government will announce the go-ahead for a road into the area within the next several months.

As for the outlook for precious metals, Pezim expects gold to approach the US$430-per-oz. level in near future, giving the VSE a kick-start as the yellow metal makes its way to US$480-500 by year-end. But he doesn’t believe international events have influenced gold to any great extent. He expects the primary driver behind the price of gold in the future to be an increasing demand for physical gold outstripping supply.

His belief in an oversupply of silver leaves him cold on that metal, although he sees a tremendous future for base metals as demand picks up from the East European countries. But Pezim does not see this taking place overnight.

“We may not see an uptrend in these metals for a year or two,” he said.

Pezim expects that gold will continue to dominate exploration activity for the next few years because of the downtrend in base metal prices and because base metal deposits are generally harder and more expensive to find.

With regard to the relationship between juniors and major mining companies, Pezim stressed it is the junior that usually finds the deposit and then the majors move in. He doesn’t foresee a change to this scenario, and he even admits that for the most part the juniors need the majors’ operating experience and capital.

Asked about the demise of the floor trader, Pezim figures that the new computerized system in place on the Vancouver Stock Exchange is far superior because of its speed and accuracy. It also gives the buyer and seller more information on a given stock market.

Pezim has made and lost fortunes on the VSE. His advice on investing would certainly be of interest to the small investor. His primary recommendation is to find a good broker. That, he concedes, is not an easy task.

Pezim suggests talking to the broker with the objective of finding out how much he knows about the mining and exploration business, and how well connected he is to the industry.

His final piece of advice is to use only 10% of one’s personal net worth for speculative investing.

What is Pezim’s stock pick of the year? Prime Resources.