SAN FRANCISCO (MINEWEB) -
The normally robust crowd of retail and institutional investors was so sparse Monday at the Metals & Minerals Conference in San Francisco, long-time conference speaker, Sprott Asset Management President Rick Rule, joked that he saw more people in the men’s room in the 1996 conference than encompassed the entire audience of attendees this year.
“It’s wonderful to see such a small compact crowd,” Rule quipped during his keynote address to the conference.
The junior and senior companies which normally exhibit at the conference were even fewer in number, a state of affairs which may ultimately benefit the investor, he suggested. Rule noted that too many junior mining and exploration companies gorged themselves on cash and wasted most of their money.
While he believes that as much as 80% of junior mining and exploration companies probably have no value at this time, Rule forecasts that some 20%-30% of junior company capital remains in accounts of a number of the surviving junior mining and exploration companies. Those companies that still exist on the TSX are the most attractive companies among the juniors, he contends, but their beauty might be in the eye of the would-be investor.
Rule theorizes that the gold market is now suffering from both seller and buyer exhaustion, which might be a good thing for some investors. Mutual fund sector holdings in gold are gone, for instance.
However, since practically no one is left to sell, Rule suggests, “The best issues in the sector might begin to melt up” instead of melt down.
Rule advises that investors need to seek junior companies that have three factors in common: have a management team that owns a lot of stock in the company; make sure the company has a good property; and last, but not least, does that company have working capital?
Finally, investors should not dwell on getting back the price they originally paid for their mining shares, Rule stressed. “What matters is how you allocate capital going forward,” he declared, adding that investors should consider the term “bear market” to actually represent a market that offers bargain prices for gold stocks that will gain considerable value in a future bull gold market.
AI
