This week I attended the Prospectors and Developers Association of Canada, the world’s biggest mining conference. And I found bargains galore… bargains that you can scoop up.
To be sure, mine is a contrarian view. Gold and silver miners have been in a bear market for years now. They’re far from their highs. It’s fair to say that Wall Street hates miners right now.
But have the underlying fundamentals on gold and silver changed? Nope. Demand continues to be strong, and supply weak.
And as gold prices came down last year, miners and developers re-figured their projects and turned over every rock to find a dollar. Sure, some companies went belly up. But that just means that other companies got to pick up great projects for a song.
So we now have low-cost miners and developers that picked up projects on the cheap, run by guys who know how to squeeze a dollar until it screams. The best ones not only are going to make money – but are going to make a lot of money
And as I’ve learned here in Canada, that long bear market meant a lot of potential gold projects were deferred. Jeffrey Christian of CPM Group told us that about a third of mining projects scheduled for development at the beginning of last year have now been shelved.
That means future supply will be squeezed. And so those miners who have working projects and can make money now are bargains.
Someone who gets the positive reality underlying all the doom and gloom is Rick Rule, chairman of Sprott U.S. Holdings.
“Bear markets are like sales,” Rule said. And he compared the low prices in select miners right now to walking onto a car dealer’s lot and finding every Lexus marked at 75% off.
“If someone lowered the price of a Lexus by 75%, would that make you less likely to buy it?” he asked. “Wouldn’t you like to buy a Lexus at 75% off?”
Rule says the market has been de-risked. And that really raises the opportunities for upside. “You’ve been here through the pain,” he added. “Why not stick around for the gain?”
I’m coming back from Canada with new recommendations for my subscribers. If the market is 75% de-risked, as Rick Rule says – and I agree with him on that – then I’d say the odds are these stocks are going to do all right.
In fact, I’d say the bigger risk is doing nothing. Sitting on your hands could cost you a lot of money.
All the best,
View original at: Investment U
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