Ross Beaty: ‘2016’s Going to Be The Bottom’

[being] close to the bottom.”

Other highlights from our conversation include:

• Positive factors Beaty sees for gold and silver prices, including the importance of investment demand, industrial demand (for silver) and how these metals have held up against the strong US dollar
• Why he likes Kaminak Gold (TSXV:KAM) and Dalradian Resources (TSX:DNA)
• Why he’s interested in renewable energy as a long-term business, and what to expect from Alterra Power this year

Watch the video above for more of what Beaty had to say.

 

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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This article was updated on March 2, 2016 to include the following interview transcript:

INN: Last year, when we spoke, you said you were pretty bearish on most metals but very bullish on gold. Do you still feel that way?

RB: Yeah, I might’ve overstated my bullishness on gold by saying, “Very bullish,” but there’s no question I am bullish, and I still remain bullish for all kinds of reasons. 

INN: Okay. That’s great. And you’ve invested in quite a few gold companies over the years, two in particular being Kaminak Gold and Dalradian Resources. What drew you to those companies?

RB: Well, actually, just for the last 18 months or so, I bought my stake in Kaminak in the fall of 2014, and then Dalradian in the spring of 2015, or early 2015. And I’ve actually got another handful of stocks, both gold companies and copper companies and other companies as well, but I do like gold and I like that kind of company because it’s quite de-risked. I mean the odds of both Dalradian and Kaminak becoming mines is very high, over 80 percent. So, there’s not a lot of risk on the actual project level. In fact, they’re both great projects. 

So, as they move along the value chain in terms of development, the odds are they’re going to go up in price. Kaminak put out a feasibility study last week. It was a good study, good numbers. So that should improve their share price as time goes by. Then they have to permit it. That will be another metric of improved value. And those sort of things. 

So, I think that should give those sort of stocks a base hit or a double maybe, as they move along, it’ll take a couple of years to do this, but they’re solid projects. Very, very big gold resources, well-exposed to gold. And I also think gold is going to go up over the next two or three years. It’s a call in gold and it’s a call in a good solid project that offers very little downside risk, I think.

INN: Okay. And onto silver, you’re also really big known follower of silver obviously with Pan American Silver. And you spoke a lot this morning about increasing demand for silver. What are some specific catalysts that investors can look for on a positive silver price?

RB: Sure. Well, silver, of course, is industrial metal and it’s a precious metal. So, industrial metal-wise, for demand, you have just extraordinary demand growth in photovoltaics. Silver is also the most conductive metal of heat and of electricity so it’s used in everything electronic. And the more junk people buy, the more gizmos, the more devices people have, they all use silver. 

So, it’s really got strong industrial fundamentals. But the real driver of silver and gold is actually going to be investment demand. It’s going to be the investor who wants to have some silver and some gold instead of having paper currency. It’s always been like that. That’s where the real price is at the margin with investment demand, and you’re seeing strong gold prices today relative to the US dollar. The US dollar’s been so dominant it’s destroyed a lot of the other metals that are inversely correlated to the dollar. As the dollar strengthens, they get weaker. 

But you haven’t seen much of that in gold. You saw it originally when gold – when the dollar kind of started to increase in value against other currencies starting in 2011. That was the top of the bull market. 

But, compared to all other metals, and oil and gas particularly, gold has actually held its value, and so has silver relatively speaking. So that encourages me and I think – I suspect the dollar will plateau one of these months, I suspect it’ll be 2016 or 2017, and that’s going to lift all ships, all metals, but especially gold and silver.

So when you look at investment demand, industrial metal demand, industrial demand, silver is so widely used in so many industrial products, I see strength on both sides. And that’s why I’m moderately bullish on silver. 

INN: Interesting. And what you’re saying about gold, you’re saying that that is dependent on the US dollar strength as well. 

RB: Almost every metal is dependent on the US dollar strength. They’re all inversely correlated. 

But I think because gold has held up very well against this very, very strong dollar, that’s just another reason to be bullish on the gold price. 

And look what’s going on in China. They’re consuming gold like crazy. The silver ETFs have hardly dropped at all. There’s a lot of silver held by investors. They love silver. Silver Eagle coins – demand is at an all-time high. There’s lots and lots of investment demand for silver. Strong industrial fundamentals. The mining industry is not going to increase the silver production significantly in the next few years because, you know, there’s not a lot of exploration happening. There’s still new mines opening. This is a sort of typical thing that we have when – this is the fifth year, actually entering the sixth year of a bear market. 

So, these are all bullish things. I mean, today, I would say it’s close to the floor, I mean, who knows where the bottom’s going to be, but I’d say it’s pretty close. It wasn’t too far away a year ago and prices haven’t changed too much in a year for silver and gold, at least. But I’m optimistic things are going to get better fairly soon here this year, maybe next year.

INN: Okay. And any other commodities you’re bullish on?

RB: Well, I like copper, I like uranium, I like lithium. There’s a few things I like. I mean, I’m not a crazy raging bull on anything right now. This is a really, really beat-up tough market. But, metal prices are so low, oil prices are low, energy stocks are low, metal mining stocks are low – it’s a buyer’s market today. It’s like everything’s on sale, and that’s the best time for investors to make money. Right now.

INN: Absolutely. And you also talked about renewable energy, of course, with Alterra Power and you’re talking about how that’s a long bet on clean energy. Can you tell us a bit more about that?

RB: Sure. So, I started Alterra because I wanted to do something green that was also resource development that I could make money at. It’s a completely different business than mining. It has no optionality. It’s not dependent on commodity prices at all. It’s not dependent on the US dollar. All it is dependent on is demand for clean energy around the world and we’re getting that in spades. Renewable energy is the fastest growing form of electricity generation in the world. It’s not going to end tomorrow. It’s just getting stronger and bigger as an industry class. And I really see it being a fabulous business long term. 

But it’s a different kind of business. It has stable, predictable, boring cash flows. The sort of thing that generate dividends. And that’s sort of next for us is to kick out a dividend. We hope to do it this year, maybe next year. Certainly, something on our – every board meeting we have. 

Alterra’s grown to the point now where it’s got a sustainability really for generations now. We do not have to do anything else. We’re built, we’re solid, we’re a good investment. The stock still is cheap. We had a great performance last year. But I think we’re still going to have another great year ahead of us because we’ve got a lot of growth coming and a great team of people and as I say, the wind is behind us right now. The industry sector is very strong. A lot of people want clean energy. And we’re there as a developer in that space. 

INN: That’s great. And one last question – as you said it’s a very long bull market. As someone who’s been around for a long time, can you give some words of encouragement to investors out there?

RB: You really meant bear market!

INN: Yes!

RB: It has been a really long bear market and that’s because the bull market was super strong, I mean, it was an incredible party for nine years. Typically bull markets last about four years. This one went on for nine years and it was just crazy strong. And I mean, driven by this secular change of demand for metals and everything else in China. 

The hangover is a little bit longer as a result. So the bear market is it’s going on for quite a while longer than normal. These things normally go for two to three years, maybe four years, and this is now entering its sixth year. 

I think it’s going to bottom very, very soon. I expect actually this, 2016’s going to be the bottom, and I did not say that a year ago. I said 2015 was going to be a lumpy year, and that’s exactly what it was. 

But we’ve seen a real capitulation in a lot of investors, in a lot of commodity prices. I just love it when that happens, because that to me is a real signal of [being] close to the bottom.

INN: That’s good to hear. Thank you so much, Ross.

RB: You’re welcome. Thank you.

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