When the instinct is strongest to curl up in a ball and wait out the ravages of the down market is also when smart companies snap up distressed projects and get to work while capital costs are low. In this interview with The Gold Report, veteran investors Bob Moriarty of 321gold.com and Adrian Day of Adrian Day Asset Management share their messages to mining company CEOs and investors about advancing frugally to avoid being left in the dark. To make investing in teams doing the right things even easier, they identify a dozen companies that have already taken the contrarian advice to heart.
Bob Moriarty, founder of 321gold.com, has some advice for CEOs of mining companies:
“Hoard your money when the market is bubbling, and spend your money when the market is dying.” It seems obvious, but in his words, the majority of investors are “sheep who will lose their money.” Pressure from conservative investors can make it difficult for resource managements to make smart decisions. That is why he focuses on the companies that already got the message about the importance of adding value when everything is on sale.
Adrian Day, founder of Adrian Day Asset Management, wants to see companies move forward while still conserving cash. “It’s not easy. But a joint venture can help offset work expenses. If a company is constantly raising money in a depressed market, the stock can just collapse,” he warns.
Movers and Shakers
A classic example of a CEO who understands the cyclical opportunities in the resource markets, according to Moriarty, was Rob McEwen at Goldcorp Inc. (G:TSX; GG:NYSE) circa 2000. “He issued the Goldcorp challenge to find the next 5 million ounces of gold at Red Lake. It wasn’t anything but a promotional gesture, but it made everybody …read more