Geordie Mark, head of mining research with Haywood Securities, sees opportunity in both development-stage and producing precious metals equities, especially those domiciled in countries like Canada and Australia, where the currency has depreciated considerably against the U.S. dollar. For development-stage companies, Mark says it’s all about visible time frames, good margins and a modest capex. And for producers it’s all about recent performance. In this interview with The Gold Report, Mark recommends two names in each category and tells investors to stay firm on quality, margin and performance.
The Gold Report: So far in 2016, the Dow Jones Industrial Average is down, oil is at near-decade lows and the Chinese stock markets continue to slide. How is that translating to your coverage universe? Should investors be worried?
Geordie Mark: It’s certainly been a tough ride in the markets for many of the precious metals producers and development-stage companies—but we see that as an opportunity. Precious metals have taken a good run in the New Year, which has certainly enabled production-related companies to bolster their operating margins through higher underlying commodity prices and lower fuel prices. While there are obviously tumultuous markets out there and some overriding geopolitical hotspots, we see this adding to the case for the risk-off trade moving toward gold, and underpinning some strength in the gold price. We see that as a glimmer of strength and opportunity for investors.
TGR: As of late January, China’s Shanghai Index had fallen 47% since its peak in June. To date, ongoing economic weakness in China has had little impact on the gold price. Do you expect that to change?
GM: If we look at the relationship between the gold price over the last year or so and the Shanghai Index, we have seen some broadly defined and sporadic antithetic relationships, with gold picking …read more