What should resource investors do as they wait for the market to pick up? Brian Leni, founder of Junior Stock Review, shares his advice.
After an optimistic beginning to the year, sentiment in the resource space has taken a downturn.
But according to Brian Leni, founder of Junior Stock Review, it’s not all doom and gloom. “Some people have made some money, and those people are certainly happy,” he said at the recent Sprott Natural Resource Symposium.
“I think for the people that have been diligent in their due diligence, they are happy because there are companies that are having good results,” he explained.
Leni is interested in quality companies that have upcoming catalysts that will drive share price momentum. “Whether it be Novo Resources (TSXV:NVO) or some of these stories [that] are fairly compelling — discoveries make money,” he said.
He also reminded investors that it’s important to be patient as it’s impossible to know exactly when the market will take a turn for the better. “Ross Beaty said it last night … we’re closer to the upswing compared to last year. That’s about all I can say as far as where we are,” he explained.
In summary? “I would just say buy quality, do your due diligence and be patient,” Leni said. Watch the video above for more insight, or read the transcript below.
INN: We’re here today at the Sprott Natural Resource Symposium in Vancouver. It’s a couple of days into the show. What’s your sense of the mood so far?
BL: It’s a little bit different from the last time we talked at PDAC. You know, it’s such a … I would say it’s not as optimistic as it was in the beginning of the year. But in saying that, some people have made some money, and those people are certainly happy. I think for the people that have been diligent in their due diligence, they are happy because there are companies that are having good results.
INN: Money is one thing — money and funding is a topic that I keep seeing come up here. Is there money out there for juniors right now? And if so, where is it coming from?
BL: Yeah, I definitely think there’s money there. I think people have become more discriminating in who they give it to. A great example — Adventus Zinc (TSXV:ADZN), they just had an investment by Wheaton Precious Metals (TSX:WPM,NYSE:WPM) for around $10 million. And then they closed another $10-million private placement the week after. I particularly like that story, but I think that the people that are showing good targets or good potential — they’re going to get the money, it’s there.
INN: Funding and money, that really relates back to exploration, which is something we’ve talked about before. Broadly it seems the consensus is there’s not enough exploration happening right now. When do you think we’ll get to a crunch in that?
BL: Honestly, I think the crunch has started here. It depends on the metal, but for me it’s a matter of when, not if, and it’s actually — I heard it coined yesterday, geological inflation, and I think that’s very real. And I see it in pretty much every metal. That’s going to lead this next bull market, which I think will be extremely strong because of that supply crunch. And you’re right, exploration is going to be a big component of what needs to be done.
INN: Okay, so next bull market coming up — where are we at in the resource cycle right now? What can we expect moving forward?
BL: That’s a great question, I’m trying to answer that myself. But what I would say is you … can concentrate on things like that, but I’m not sure it necessarily gets you where you want to be. I think for people that are looking to make money — and of course, you know, with the time value of money in the short term that’s typically what people are thinking — I think you need to look for companies with catalysts to drive the share price. And we’ve seen — whether it be Novo Resources or some of these stories [that] are fairly compelling — discoveries make money.
Talking back to your question [about] the cycle. You know, Ross Beaty said it last night … we’re closer to the upswing compared to last year. That’s about all I can say as far as where we are.
INN: Okay, that’s fair. Let’s switch gears a little bit. We were both recently in the Yukon doing a mining tour of different properties up there. What were your thoughts? What did you think? I think it was your first time up there.
BL: Yeah, it was a great eye-opening opportunity for me. I wasn’t really familiar with the companies in general, so it was a great opportunity to bring people up there. For me, the Yukon is I think … Canada’s mining future is probably going to be in the Yukon, or at least one of the places. The deposits you see there, they’re up amongst some of the world class in size, and some with grade too. And with the infrastructure projects that they have planned over the next two to three years, I think that’s going to be integral for those deposits to be developed. I think the future is bright — it is a matter of when though.
INN: As usual.
BL: Yeah, as usual.
INN: One takeaway for me from visiting the Yukon was it’s got a lot of mining history there. What are the pros and cons of looking at companies in a jurisdiction like that vs. one that has seen less exploration.
BL: You know, it’s interesting. The blue-sky opportunity — countries that haven’t been touched are typically the countries that from maybe a political standpoint have the most controversy.
But I’m a big believer in quality first, and I think that you need to educate yourself on these jurisdictions that hold such high potential. Ecuador I think personally is one of them that maybe is on an upswing from a period of time where as a jurisdiction they weren’t seen as desirable. But I think there’s a ton of mineral potential, and ultimately I think that in the future those are the places where the new deposits are going to come from.
INN: I think we’ll leave it there for now, unless you’ve got any final words for investors as we head into the rest of the year.
BL: I would just say buy quality, do your due diligence and be patient.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.