Resource World Magazine

f e b r u a r y / m a r c h 2 0 1 6 www.resourceworld.com 7 e d i t o r ' s c o m m e n t s E l l s w o r t h D i c k s o n ellsworth Dickson, Editor-in-Chief email: editor@resourceworld.com t: 604 484 3800 | 1 877 484 3800 • Regular scheduled flights to BC's mineral resource region, including Dease Lake and Bob Quinn • Daily direct flights to Vancouver, Kelowna, Prince George and others • Multiple airport-based helicopter and fixed wing charter operations Your Way Up www.smithers.ca/airport Access to the Northwest made easy Despite low commoDity prices, ultra-low resource stock valuations, stock market volatility and hard-to-find exploration funding, the mining industry will carry on. At the risk of sound- ing obvious, unless you live in a grass hut in the jungle, your modern lifestyle is totally dependent on mining. As such, the world will continue to need metals and minerals. The problem, of course, is that the mining sector as well as the stock market is subject to the impact of various events, cir- cumstances and investor sentiment that negatively and positively affect share prices. As Sprott Chairman/Founder of Sprott Global Resource Investments Ltd., Rick Rule, commented in a recent Sprott's Thoughts newsletter, "The first thing I hope that people do is understand that if the narrative that existed with regard to resources and precious metals in 2011 was true then, it's more true now. Only the price has changed. Investors need to recognize that a market that's fallen by 88% in nominal terms and 90% in real terms is precisely 90% more attractive now than it was then." This means there are attractive bargains out there in the resource sector. But what should a resource stock investor do? Gwen Preston, publisher of the resource-related newslet- ter, Resource Maven, told Resource World, "I would say that my strategy is to focus on management teams that are finding ways to advance their assets regardless of the 'perfect storm of nega- tive circumstances'. I think that for a few years of the bear market many companies – maybe most companies – focused on how to just survive in the bad times," said Preston. "And if they survived, then they would be able to do well once the market improved. Companies have now realized that it is not just about surviving. It isn't just about keeping the lights on until the market recovers. It's about finding ways to advance your assets – bear market be damned." Preston said she doesn't expect one particular event such as a big discovery to jump-start the junior mining sector. Rather than sudden changes, she thinks the prevailing downturn's even- tual recovery will be like a wide letter U at the bottom that gets going via a slow strengthening of the market. She noted that the US bull market is getting tired and investors will soon be getting out of, say, tech stocks and into mining stocks that offer growth potential. She expects there will be a slow strengthening of fundamen- tals such as higher commodity prices – uranium, for example – as well as good news from resource companies. "Basically, investors will need to feel confident they can make some money in mining stocks," said Preston. As an example of a slow strengthening of the gold sec- tor, Prentice Lee, an Investment Advisor at Canaccord Genuity, pointed out in his blog on January 11, "Since mid-November the S&P/TSX Global Gold Index is up 22.5% while the S&P/TSX Composite was down 6.5%. In addition, Brien Lundin, publisher of the Gold Newsletter, wrote on January 12, "We're also seeing huge buying into the gold ETFs, with 19.6 tonnes of gold being added over the last three days." No, it is not possible to know the future, however, seeking out companies with great management, great mineral projects and funding in place helps to de-risk your investment and – sooner or later – the cycle will turn and you will have fulfilled half the strategy – buying low. n preparing for investing in 2016

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