Analyst Jayant Bhandari explains why he’s bullish on gold right now and shares his tips for investing in junior resource stocks.
“Gold hasn’t really broken through as yet,” said analyst Jayant Bhandari at this year’s PDAC convention. Nevertheless, he’s optimistic about the yellow metal for two reasons.
“I think we have sociopolitical crises developing around the third world countries, and the first world is not doing all that well either,” he explained.
Bhandari continued, “there is a reason why people want to protect their wealth, and that was the reason why so many people invested in cryptocurrencies — it was the same psychology that led them to cryptocurrencies. But some of these people will come back to gold.”
He noted that when he is choosing which junior resource stocks to invest in his goal is to find a difference between price and value.
“I want to put a value on every company that I want to invest in, and I want to see if I can get it at a price that is substantially lower than the value that I can perceive in that stock,” he said.
Watch the video above for more insight on the resource space from Bhandari. You can also read the transcript below or click here to view our full PDAC playlist.
INN: We’re here on day two of PDAC. I wondered if you’ve had a chance yet to get a sense of the mood at the convention?
JB: There are fewer people than there were last year. Although today there has been a sudden increase in crowd at the conference, so I’m not really sure about the mood. What I do remember is that in Vancouver in January when there was the Cambridge conference, there was a good mood at the conference; however, it did not necessarily translate into stock market action. I’m not sure what this means … in terms of stock market action, but there are fewer people anyway.
INN: We’ll have to wait and see. Many people come to events like this in search of stock picks and investing ideas. What criteria do you use when you’re picking junior mining stocks?
JB: What I’m really looking for is a difference between value and price. I want to put a value on every company that I want to invest in, and I want to see if I can get it at a price that is substantially lower than the value that I can perceive in that stock.
Now, it does not matter whether it’s in the Congo or it’s in South Africa — although I wouldn’t really want to invest in South Africa today. Really what I’m looking for is that if I think that I … might lose 50 percent of my project in the Congo, and [a similar] project in Canada might be worth three times more, I might be better off investing in the Congo. So it’s always the differential between value and price.
INN: I know you have an interest in gold stocks. Are there any you’re currently watching that you could mention?
JB: I just went to the presentation of a company called Irving Resources (CSE:IRV). The ticker is IRV and they have projects in Japan. I’m — it’s a very speculative stock, but I’m very excited about what they’re doing at their projects.
INN: I haven’t heard much about mining in Japan. Is that an upcoming area to look at?
JB: Absolutely. Remember, Japan was almost closed for mining for most of the last century. The reason was that the Japanese government did not necessarily give exploration licenses, but also the Japanese currency was extremely expensive. Property prices were exploding in Japan, and … some of the people might recall that in the 1980s, just the grounds of the Imperial Palace in Tokyo were worth more than the real estate price of the whole of California. So it was very, very difficult to do any exploration work in Japan, but the yen has fallen and they have opened up the regime for exploration in Japan.
INN: So gold — we’re a couple months into the year. How are you feeling about gold so far?
JB: Gold hasn’t really broken through as yet, and the reason is that it did go up in the US dollar, but it actually fell in most other currencies. It was mostly stagnant in most international currencies.
I am very optimistic about gold for two reasons. I think we have sociopolitical crises developing around the third world countries, and the first world is not doing all that well either. There is a reason why people want to protect their wealth, and that was the reason why so many people invested in cryptocurrencies — it was the same psychology that led them to cryptocurrencies. But some of these people will come back to gold.
INN: Can you talk about the appeal of gold in the context of some of the difficulties facing fiat currencies?
JB: Fiat currencies have no backing so … how do you put a value on fiat currency? It is dependent on the mood of the people who manage the fiat currency. [It gets] inflated away all the time. I want to protect my wealth in a way that it is connected with commodities and what I consume in life, and gold is one of the mediums for me to protect my wealth from getting expropriated either directly or indirectly by the government.
INN: Gold is obviously a standby for many investors. But are there any other commodities that you are interested in right now?
JB: I like all commodities right now, mostly because you see there’s one emerging country, and there’s only one emerging market today and that is China. China consumes anything between 50 to 75 percent of all the commodities produced in the world. That means that there is a huge demand underpinning virtually every commodity. And China is currently investing close to a trillion dollars setting up the One Belt One Road project connecting 60 to 65 countries. And that will underpin a lot of demand for commodities going forward. They’re already doing the construction work.
INN: Final question. Can you share your thoughts on the current excitement about cryptocurrencies and cannabis? I know some people think they’re taking investment dollars away from the mining sector. What are your thoughts?
JB: I don’t see it that way … there is a lot of cash available in the market. The problem is that the mining industry has actually lost the confidence of investors. The mining industry has to seriously do self reflection to make sure that they generate a profit and returns for the investors.
As far as cryptocurrencies are concerned, I love blockchain, but I don’t even understand how you can put a value on cryptocurrencies. Is bitcoin worth zero dollars or is it worth a million dollars — I can’t put any number on it, so I don’t invest in it. But I’m very happy that cryptocurrencies have put a huge amount of fear in the hearts of federal banks that they cannot just keep printing money, people are looking at alternative ways to protect their wealth.
INN: Can I add one more question? What should those mining companies be doing to regain confidence?
JB: They have to generate a profit. They cannot let money go wasted on projects just for promotional purposes. They have to drill their projects and they have to drill projects that they really think have value. And they have to come from a psychology of adding value to the projects rather than adding value to the promotional activities. I think once they start adding value to their projects, once they start returning money back to the shareholders, that’s when shareholders will actually bring their money back to the mining industry.
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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.