Wednesday March 08, 2017 10:14
(Kitco News) - Mining investors have a new strategy in their tool box and one researcher has crunched the numbers and is surprised with the results.
Sunday, at the Letter Writers Forum at the Prospectors and Developers Association of Canada conference Louis James, senior investment strategist at Casey Research revealed the results of his latest analysis of mining companies, saying that he thinks the best investment opportunity is the duration from when a company announces the construction of a mine and to first pour.
“The research shows that mine builders deliver better than double 95% of the time. That is just incredible. Everyone I have showed the numbers to are blown away,” he said in his presentation.
Kitco News caught up with James on the sidelines of the PDAC in Toronto to talk about his latest research. He noted that the investment strategy is not a new concept but he is probably one of the first to actually review the data to quantify the gains.
He added that the data show this is a much for attractive strategy than just playing the exploration game, investing in a company that hope to find the next big deposit.
He acknowledged that junior miners have the biggest potential but is research shows that mine builders have consistent gains.
“In exploration there are big gains but they can evaporate just a quickly,” he said. “This strategy gives you a clear entry and exit point. Get when they announce construction and get out when they announce first pour.
Looking at the gold market, James said that he is bullish on the market as prices have broken their downtrend. He added that geopolitical uncertainty and the start of a new commodity super cycle are two strong positive factors for the gold market.
While gold has slipped and could potentially fall to $1,200 an ounce ahead of the Fed meeting, James said that he is not too concerned with a drop in the price.
Although the Fed is all but guaranteed to raise interest rates following next week’s monetary policy meeting, James said that there is a lot of uncertainty swirling throughout the U.S. economy because of Donald Trump’s presidency. Trump comments that could trigger a global currency war or trade war would force the Federal Reserve to the sidelines, he said.
“If gold takes it on the chin because of the Fed, I see that as a buying opportunity,” he said.
The Prospectors and Developers Association of Canada conference is the world's largest gathering of miners, which concludes today.