From his perch in Johannesburg, Swiss-born Craton Capital Fund Advisor Markus Bachmann has been watching the metals price and cost cycles, and he has some good news. The days of mining company managements using shareholders to support their lifestyle may be nearing an end. He is seeing more companies run like a business, throwing off free cash flow even in a depressed price environment and providing opportunities to get in on the ground floor of turnaround stories. In this interview with The Gold Report, Bachmann shares six names from the portfolio that pass his rigorous resource and operational criteria tests.
The Gold Report: What are the indicators you watch when evaluating the fundamentals behind gold, silver and copper? Are you looking at financial policies in the U.S.? Gross domestic product (GDP) in China? Economic headlines from Europe? Something else entirely?
Markus Bachmann: Those are all short-term catalysts. A potential interest rate increase in the U.S. might be a midterm overhang, but it could also be a catalyst. We shouldn’t overanalyze the gold market. The gold market will do what the gold market will do. It often comes down to a longer-term sentiment. We learned over the last few decades that gold moves in rather lengthy cycles.
One fallacy is that gold is a safe haven. During a financial crisis like the one in 2008, gold is often used as a source of liquidity of last resort. That’s why when the world goes to pot, gold declines because it is being sold into a falling environment to fulfill margin calls or it is sold because other assets are falling even harder.
“MAG Silver Corp. has a very strong joint venture partner and a lot of exploration upside.”
Distressed financial markets, as we saw when the Shanghai Composite …read more