It’s buying time [again]

Insider: Ross Beaty

"I don’t know if it’s the bottom any more than anyone does," says Ross Beaty, "but it’s very close to the bottom I think, and this is when the big money is made when things turn. And they always turn"

Who: Ross Beaty, founder and chairman of Pan American Silver Corp. (TSX:PAA), founder and executive chairman of renewable energy company Alterra Power Corp. (TSX:AXY) and a lauded geologist and lawyer with 40-plus years of mining industry experience.

Involvement: Beaty has a track record of making smart investments in minerals and junior miners and selling them for significant gains, most notably the Lumina group of companies and Augusta Resources. Today, along with Pan American and Alterra, Beaty is actively involved with Anfield Nickel Corp. (TSX-V:ANF), Odin Mining and Exploration Ltd. (TSX- V:ODN), and has sizeable stakes in other ventures.

Listed It’s such a bear market in mining these days, the mood is grim, yet you were putting money into mining companies as recently as last year?

Ross Beaty Oh, I still am. I bought 200,000 shares of Pan American Silver just last week [in January]. I’m investing significantly. I’ve been investing for the last 18 months, quite significant amounts in different resource companies.

Listed Obviously a lot of people aren’t doing that. Can we pick your brain a bit further on your thinking?

Ross Beaty It’s like buying clothes, everything’s on sale right now. Prices are cheaper than they’ve been in five years and in some cases some companies are trading, I feel, on a risk-free basis for almost nothing. So, it’s the best time to buy.

Listed I’m sure you talk to your peers, are they doing the same thing? Is this sentiment fairly widely held?

Ross Beaty The sentiment is widely held but very few people actually push the button. Either because they’ve lost a lot of money and they don’t have the capital to get into the space now, number one. Number two, there’s a human tendency to buy at the top and sell at the bottom, just general human nature. It’s hard to be a contrarian. Number three, markets always tend to overreact on the upside and overreact on the downside. So, at the bottom things will end in a capitulation and after that happens, it’s very hard to press the trigger to get back in when things have done so badly.

But I’ve been through many cycles, this is no different than any other ones and it will correct. Not in every commodity, not in every company, but generally speaking buying today will be a very good outcome a year or two from now. The other thing I will say is, it’s very easy to say all this; it’s very hard to do.

Listed Hard in your gut, you mean?

Ross Beaty Yes. It’s easy to know the truth of what I say, but it’s still very hard to push the buy button. Even if you know you’re right, it’s hard to do.

Listed How about if you’re looking at the situation as a director? When things decline in a protracted way like this it must be difficult from a board and strategy level?

Ross Beaty Well, it is difficult to be sure. You have to take a very cautious approach to spending money. You have to be a bottom-feeder if you’re buying and you have to understand in this business, because of where equities are, it’s cheaper to buy gold through buying shares in other companies than it is to explore and discover it. And so this is not a market to be an aggressive explorer unless you can use third-party funding—and I mean other companies’ funding, not your shareholders’ money—and yet it’s also the best possible time to be bulking up on assets and trying to acquire assets that will be valuable if metal prices turn and we return to a bull market environment. It’s what has worked for me in the past when we’ve had similar kinds of markets and that would be my advice to others if they can do it.

Listed One of the companies you invested in last year, Savary Gold Corp. (TSX-V:SCA), is in Burkina Faso, where last fall there was a coup and in January an al-Qaeda terrorist attack in which six Canadians died. How do you look at the risks out there on the international stage?

Ross Beaty It’s a good question. I guess the bottom line is you can’t be too clever about managing political risk because countries change so quickly from being bad to good and being good to bad. And so I take a diversified approach. I look at the asset first, the management team second, and down the list I look at the country. I don’t worry too much about jurisdiction, but having said that there are lots of places I don’t invest in. I don’t invest in Russia or the CIS countries at all. But generally speaking if a country seems reasonable, there are lots of other companies there already, the mining sector seems to be doing well, I would invest in that country and Burkina Faso’s an example of that. There’s a dozen companies doing very well in Burkina Faso, notwithstanding political noise, and that gives me comfort.

Interview by Listed Staff

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