Issue link: http://resourceworld.uberflip.com/i/1190748
12 www.resourceworld.com D E C E M B E R / J A N U A R Y 2 0 2 0 bottoms, during the recovery for the gold mining industry in general, the Index has been between 200% and 1,200% and cov- ered time frames as brief as nine months and as long as 46 months. What that says is that given we are approaching the bot- tom, at the bottom or just off the bottom of a market that is, in a historical context, oversold and facing the recovery that will give us between 200% and 1,200% gains. If history is a guide, investors need to participate in the precious metals equi- ties markets, and I would argue with you that for new investors at least 75% of their investment should be in investment qual- ity precious metals companies. You don't need to take an awful lot of risk to increase your gain when the gain on offer, at least from a historical perspective, is between 200% and 1,200%. Capture the gain but don't take the risk. For investors that subscribe to Resource World, that is, investors who are doing the work and taking the time to be more sophis- ticated, probably 25% of their investment, or rather 25% of their portfolio, could be allocated to speculation – smaller compa- nies where you would hope and expect that they would do disproportionately well as a consequence of either increased precious metals prices, or as a consequence of good fortune that you believe that they might enjoy in the exploration sector. I think it's important that you par- ticipate in this bull market. I think it's important that most people participate by de-risking, that is, rather than trying to squeeze every last nickel out of the mar- ket, to own the best companies that you can and enjoy the increase in the gold price by owning companies that actually have and are efficient at producing gold. The second thing that investors must look at is the other materials, all the other materials in the world, and here you have to do two different things. You must have a much longer perspective such as a four or five-year-perspective and you need to invest in materials that are essential for the way we live. It's all very well to get excited about some new high-tech something or other, but historically the money in resources has been made in the big commodities that are essential for the lifestyle we've come to enjoy – things like oil, Canadian oil in par- ticular, now that everybody hates it, as well as metals such as copper, nickel and cobalt. It's also important that for the specu- lative part of one's portfolio, not the investment part, but for a typical Resource World subscriber's part of their portfolio, they do three things. The first is to confine speculations where possible to companies that are led by teams that have already been successful in the past, and are large investors in their current circumstance. That is, you want experienced partners – not managers – behind your story. You also don't want to play around with small mines or small exploration projects. It's seductive to think that a management team could find a small high-grade deposit, put in production and use the cash flow to grow the company. The problem is that it almost never works. It's important that if you take the risk inherent in exploration, you take risk with the view that small mines can only make small money but they come with big risks. It's important you go after great peo- ple, go after big deposits and understand that you are taking some time risk of not receiving the ultimate investment benefit if you are a short term speculator not will- ing to wait it out. I think the last thing for speculators to realize is that we are inevitably coming back into an exploration market, but it doesn't have to happen soon. We have de- emphasized exploration for ten years, that is, the industry has restrained exploration expenditures because the industry was more concerned with survival than expan- sion, and going back, at least in Canadian capital markets probably 30 years, too many exploration expenditures have gone to justifying market capitalization – drill- ing things like director's holes, twinning or duplicating a prior successful effort rather than attempting to make either MINING OUTLOOK