We asked resource industry experts what trends in the space investors may be overlooking. Here’s what they said.
This year’s Prospectors & Developers Association of Canada (PDAC) convention wrapped up on March 6, and, as usual, the event was a busy one.
Attendance came in at 25,843, up slightly from last year’s 25,606, with outgoing PDAC President Glenn Mullan saying after the show that the resource space is “experiencing a renaissance and renewed sense of confidence, highlighting its resilience once more.”
The Investing News Network had the opportunity to interview dozens of speakers at the show about a wide variety of topics. To help investors better understand how to play the resource space right now, we asked them to identify trends they think might currently be overlooked. Here’s what they had to say.
1. We’re not finding enough new deposits
“I think [one] overall trend is that we’re not finding near enough new deposits to replace what we’re producing,” said Brent Cook of Exploration Insights. “That’s a big, long-term trend, and it’s going to get worse. It’s not getting easier to find deposits; it’s harder for a number of reasons.”
While investors may not be aware of this trend, Cook did point out that major miners are wise to it.
“We’re seeing majors put a lot more money into junior companies, either by placements, financings or joint ventures,” he commented. “Which tells … us again that they see this coming and they want to be in the right places with the right people.” It may be time for investors to start thinking the same way.
2. There’s potential in early stage exploration
Lobo Tiggre of Louis James LLC also spoke about exploration. “I’m not sure about trends, but I would say the unloved, redheaded stepchild right now has to be the early stage exploration story,” he said.
“And I understand — I mean, it’s hard to get excited about the process. What matters is the discovery, and you never know when that’s going to happen.”
However, he explained, “If you want to buy low and you want to get in really cheap on something that has spectacular potential … pay some attention to that overlooked area.”
In his opinion, prospect generators are particularly interesting, as they “use other people’s money to offset the risk.”
Tiggre concluded, “That is the get rich on process play, which is boring when the markets are down, but therefore contrarian and cheap.”
3. Environmental legislation has pros and cons
Paul Robinson, director at CRU Group, noted that resource investors may also want to pay more attention to environmental trends, both in the short and long term.
“The short-term thing to look out for is sudden changes in legislation,” he said. “If you have exposure to scrap processes, and suddenly Category 6 changes overnight … you better be on the right side of that position. If you’ve got exposure to plastics, if you’ve got exposure to other forms of environmental change, there may be upside opportunity there, but there may be risk.”
He suggested that the key for market participants is to understand the risks involved in their investments. “Maybe, particularly in 2019, look at the environmental legislation that underpins your belief in that particular stock or that particular commodity,” Robinson added.
4. The trade war won’t last forever
“The supply/demand fundamentals for base metals, especially copper and other things too, like zinc and nickel, are pretty compelling right now,” he commented. “But they’ve been knocked down or held down by the cloud of the US-China trade tariffs.”
He believes the trade war will ultimately be resolved in favor of the US, and when that happens “copper’s going to soar.” He added, “If I was speculating right now, I would be buying some good copper companies that will have leverage to the price of copper.”
5. Investor education is key
Finally, Sprott’s (TSX:SII,OTC Pink:SPOXF) Rick Rule took the question in a different direction, pointing more to trends he would like to see rise to the forefront.
“I think the most important trend for investors is their own education — mastering their emotions, understanding that this is a cyclical business,” he said.
“Bull markets, which people love, are risky; bear markets are sales, when goods are on sale. And if investors will teach themselves that the price of a stock is less important than information concerning its value, they will begin to do well.”
He also pointed to the value of asking the right questions. “Asking questions where the answer begins with ‘when’ involves answering yourself a much higher-quality question than one where the answer begins with ‘if.'”
Want more content from PDAC? Click here to view our full interview playlist on YouTube.
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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 the interviews it conducts. 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.