VANCOUVER — Mining financier and entrepreneur Ross Beaty told an audience at the Vancouver Resource Investment Conference in late January that it’s a “phenomenal” time to buy resource stocks.
“The tide is way out and it’s a buyer’s market everywhere across the board from oil, mining, currencies and real estate,” Beaty said. “Every so often cycles get to the point they are at today, and it’s just hard to lose. It’s a wonderful time to be in the market.”
He admits most of his money has always gone into companies he either manages or is otherwise involved with, but in recent years, he’s been beefing up his stake elsewhere in the junior resource sector.
Transactions of late include taking a 9.9% stake in Kaminak Gold (TSXV: KAM) for $6.7 million; 9.7% of Dalradian Resources (TSX: DNA) for $11.3 million; and ploughing $5 million into Odin Mining and Exploration (TSXV: ODN).
Beaty said the first thing he looks at when considering an investment is the quality of the company’s management team.
“The companies I invest in are run by good people and people I can trust, so I don’t have to worry about it, but that’s easier said than done,” he said. “It’s not true that only good management makes good news for people. Every so often an idiot or a crook will surprisingly make money just by being lucky. This happens in our business, but more typically good management teams are where you look first.”
Beaty’s second piece of advice to investors is to make sure their portfolios are well-diversified.
“Say you have some assets that are in production, others advanced-stage and lower risk, then others that are much more speculative and risky,” he said. “For the more advanced projects there’s little likelihood you’ll lose money … but if you bet on the smaller companies with more exploration risk, you could get a grand slam.”
But the most important factor in making an investment, he said, is to get the timing right.
“This is not rocket science. When metal prices are trading at all-time highs they’re probably going to go down, and when they trade at all-time lows they’re probably going to go up,” he said. “Commodities go down until that magical point when you hit the bottom and the tide comes in again, and everyone makes decent amounts of money.”
Beaty’s outlook for silver, copper and uranium is highly optimistic, and he reckons oil today is “one heck of a bargain,” but remains skeptical on coal, iron-ore and nickel.
He’s bullish on gold, which has performed well relative to the other commodities, despite a strong U.S. dollar.
“If the U.S. dollar stays strong for a projected period, that will definitely be a bearish factor in the gold price, but I don’t think it’ll get knocked down too much,” he said. “It will certainly outperform the other metals, with the possible exception of silver.” (Beaty remains chairman of silver miner Pan American Silver [TSX: PAA; NASDAQ: PAAS]).
He brushed off speculation that troubled major miners such as Teck Resources (TSX: TCK.B; NYSE: TCK) and Glencore are too deep in the hole.
“Teck is not going bankrupt. It’s a well-run, deep company with fabulous world-class assets, and it will always be around,” he said. “The timing of their oilsands investment was a mistake, but what they got was a long-term, world-class asset. When oil prices turn, the stock will double quickly. It’s a great buy.”
Northern Dynasty Minerals (TSX: NDM; NYSE-MKT; NAK) is another company that Beaty said could see its shares “strike a home run” if it can attain environmental permitting for a mine at the Pebble copper-gold deposit in Alaska’s Bristol Bay region.
The project has been halted since the U.S. Environmental Protection Agency (EPA) vetoed the firm’s permit application because large-scale mining in the region would wreck one of the world’s biggest salmon fisheries, and other critical habitat.
The company has since launched litigation against the agency, alleging that it had “incontrovertible evidence” that the EPA cooperated too closely with environmental activists and made its decisions before undertaking a full scientific inquiry.
Northern Dynasty believes its dispute with the EPA will be resolved this year.
“I’ve bought some Northern Dynasty myself and I think it’s a good, safe bet today,” Beaty said. “I’m going to guess they’ll have permit success, and that will be a huge catalyst in the stock price. It’s an unbelievable orebody.”
Beaty admitted he’s not a “disciplined buyer” and doesn’t analyze his investments every day.
“I take my bets for the long-term and try to buy things that I only have to sell once,” he said. “I look at companies that will be taken out or those that are going to build themselves into real companies that will last beyond my lifetime.”
Do not buy stock in Dalradian unless you want to risk it all if you consider rising community aggravation at the prospect of a mine close to our homes and schools. Cross party support for the local community in against Dalradian and considering that planning permission has not been passed and parties make these decisions take this risk at your own peril.
Very insightful