The Gold Show in New York, organized by Tim Wood, Marlene Weeks and the rest of the folks at International Investment Conferences, was a very valuable experience for Al Korelin. Not only was I given the opportunity to moderate two dynamic and thought provoking panels, but I was also able to spend uninterrupted time with some of the regular guests on our radio program, The Korelin Economics Report. The exchange of ideas that occurred was invaluable to me.
Let me tell you, when you think you are on top of it with all of your economic thoughts, get involved in a conversation with Paul van Eeden, Jay Taylor, Greg McCoach, David Coffin or Sean Rakhimov. When you do, leave your ego at the door because these guys will always teach you a thing or two.
Greg, David, Sean, Jay and I had dinner together on the last night of the show at a great Italian restaurant and then talked for two or three more hours at a great little pub called Rosie O’Grady’s. Their respective ideas regarding resource investing in the current environment are worth repeating here. They all agreed that there are some great buying opportunities out there, but that caution still needs to be exercised by investors.
We began by talking about how to assess mining companies today.
You would think that given the current depressed share prices of most of these companies, my friends would say that each and every one represents a bargain basement opportunity. Not so, they all stressed that careful due diligence on the part of investors needs to be the order of the day.
Rakhimov stressed that, in his opinion, fundamentals were absolutely critical in this environment. For him to consider investing in a particular situation, it would have to be one in which there was very little room for doubt.
His thoughts are based on the current financing environment. Because of the difficulties associated with raising capital today, any company that warranted his attention would have to have a strong balance sheet that exemplified no need to go out and raise money in the near future. Exploration companies at the bottom of the food chain that did not have proven assets also were not high on his list.
Sean’s point is very well taken when you realize that on-going financing is usually necessary for a resource company to continue its exploration program. It is the rare junior company that has enough capital to allow it to continue exploration work two to three years into the future.
Greg and David agreed that there were a number of companies today that fit Sean’s criteria, but they took it one step further.
They brought up the subject of timing, just how long will this environment of depressed share prices exist?
Based on market activity (it’s always slowest during the summer months), current economic conditions, the upcoming presidential election in the United States, the potential for continued economic growth coming out of India and mainland China and other issues, Greg was the first to say that he thought the best opportunities would exist during the months of June, July and August. Everyone agreed, but David was the first to say that he thought favorable buying conditions would continue for at least a couple of years. The share prices of summer would escalate but the opportunities for appreciation and resulting profits would still be there.
We all agreed that the universe of investment opportunities in the mining industry today is ripe with public companies that can be purchased at bargain basement prices. I discussed this in my previous column for Kitco and I bring it up here again because, as Dudley Baker said during one of my panels, “we should all be thankful for the investment opportunities that each and everyone of us has today. As my friend and collegue Jay Taylor said, “I have never seen such phenomenal opportunities among the universe of public companies that I follow for my subscribers.”
I interviewed the folks mentioned above along with others. If you would like to hear these interviews simply go to the website of The Korelin Economics Report shown above.
The investment conferences which I attend, organized by Cambridge House, International Investment Conferences, The Silver Summit, Com-Invest in Europe and Rich Radez all represent the best educational forums available to anyone who is interested in investing in hard assets. I cannot stress enough how important it is for each of you to attend as many of these meetings as you can. Each one provides a forum where you can obtain the best insurance possible against investment losses. That insurance is called “knowledge”.
Al Korelin is the host of the internationally syndicated Korelin Economics Report radio program and the President of A.B. Korelin and Associates, Inc. – a regulatory consulting firm that has been providing services to mining companies for the past 27 years.