Current Gold Market Environment Is Creating Value For Senior Miners – Mining CEO
(Kitco News) - Every cloud has a silver lining and so does the mining sector's current market environment, according to one mining executive.
Ian Ball, CEO of Abitibi Royalties
The gold market is struggling to find momentum as prices hover around $1,200 an ounce and strong negative sentiment weighs on the mining sector, with overall value hanging around levels not seen since early 2016.
However, in a telephone interview with Kitco News, Ian Ball, CEO of Abitibi Royalties (TSX.V: RZZ), said that in this current market environment large producers should be looking to buy undervalued mines for long-term production.
“There are a lot of mid-tier miners that are struggling right now. Their mines are valued at pennies on the dollar and seniors should be taking a hard look at assests that are in their area.”
Ball added that Abitibi Royalties is currently using a strategy such as this. He explained that this summer they have purchased several royalty agreements around the Malartic Mine in Northern Quebec, one of the largest gold mines in Canada. Currently, Abitibi has ten streaming agreements at the mine and surrounding properties.
“We’ve been more active in the last couple of months than we have been in our corporate existence,” he said. “We have a very simple strategy: We believe that Malartic is only going to get better and better. If you have an asset, then you should believe in it. We continue to build our presence in the Abitibi region.”
While this hasn’t been a great summer for most precious metals companies, Abitibi has been able to buck the trend as its share price has held relatively steady holding at the top of its five-year range. In June, Quebec-based public investment firm Caisse de depot et placement du Québec bought a nearly 5% stake in the royalty company.
Looking at the gold market, Ball is not expecting to see a significant rally just yet, but he is also not projecting a bear market anytime soon either.
“I think we are just going to continue to trade sideways for a period,” he said. “But I do still believe that gold is in the bottom third of its market and now is the time to be looking for value.”
As to what mining companies Ball likes, he said that investors should continue to look at royalty and streaming companies as they have low production risks but are still leveraged to the gold price.