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How Would Brent Cook Invest $100k in ’16? – Invest Like Experts, Mining Edition

(Kitco News) - Invest Like The Experts (#InvestLike) has come to an end, but before leaving you this year, Kitco News would like to offer its readers a special Mining Edition of the series to see where one expert would invest his money in the sector in 2016.

We spoke with famed geologist and editor of a popular mining newsletter, Exploration Insights, Brent Cook to see how he would invest $100,000 in mining this year. What mining companies are best positioned for 2016? What projects may have the most potential?

PART I: Vince Lanci tells Kitco News how he’d invest $100,000
PART II: RBC's George Gero Gives His Investment Ideas For 2016
PART III: Rickards: Fed, USD, Inflation To Have Biggest Impact On Gold In '16
PART IV: Schiff Shifts More Weight On Gold For 2016 – Invest Like Experts Series

Brent Cook

Expert: Brent Cook

Claim To Fame: Geologist & Editor of Exploration Insights, a junior mining investment letter whose portfolio returned +18% in 2014 and -6% in 2015.

Thoughts on the mining sector: “The mining and exploration sector has been decimated over the past few years and is off over 80% from its highs,” Brent Cook told Kitco News Friday.

Mining companies have experienced another tough year with more cost, production and exploration cuts as well as downsizing and mine closures, among other negative news.

The Gold Miners ETF Market Vectors (GDX), which tracks the performance of major gold mining companies listed on the NYSE Arca Gold Miners Index, has steadily been declining since 2012 and is currently at record lows.

And, as Cook put it in his year-end newsletter, “it is hard to find anyone positive on the sector…or even think there is a need for exploration.”

“This is as bad as I have seen it, and I see very few logical reasons to think it gets better anytime soon,” he added.

However, when asked how he would invest his money in the sector this year, Cook said he sees potential in three key areas.

For more on the mining sector, watch Brent Cook’s 2016 outlook interview with Kitco’s Daniela Cambone.

How would you invest $100,000 in the mining sector in 2016?

40%      Mid-tier Precious Metal Producers with low cost production and legitimate exploration upside

Examples: Lake Shore Gold & Claude Resources

25%      Prospect Generators with sufficient cash to last a couple of years, partners spending money, legitimate exploration concepts and honest management

Examples: Mirasol Resources, Reservoir Minerals, Riverside Resources, Aurion Resources, Lara Exploration, Miranda Gold, Evrim Resources

35%      Very Early Stage Discoveries that may occur this year

 

What factor will affect the mining sector the most in 2016?

“Metal prices and…political uncertainty then China,” he said.

 

What is your New Year’s investment resolution for 2016?

“One has to be very critical and brutal when evaluating exploration results and sell if your investment thesis begins to fall apart regardless of what your purchase price was,” he said.

“The key to making money in the junior mining sector is #1--Don't lose money and #2 always fact check a company's statements and data--sometimes they make things up,” he added.

 

More Thoughts On Mining….

In his year-end commentary, Cook said that although sentiment towards the mining sector is predominantly negative, he is ‘cautiously optimistic’ for 2016. Most of the bad news has already been factored in, he continued, and the downside potential is “considerably less” than it was a few years ago.

“My expectation for the year is that gold will struggle within a 20% range but end the year neutral to up,” he said.

“Actually, when things ‘can’t get much worse’ they tend to get better.”

Editor’s note: At the time of publication, Brent Cook held positions in the stocks mentioned above.

By Sarah Benali of Kitco News; sbenali@kitco.com
Follow me on Twitter @SdBenali

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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