“There is a huge amount of uncertainty in the financial markets right now,” Lawrence Roulston, a geologist and editor of the newsletter Resource Opportunities, told an audience at a mid-September Cambridge House conference in Toronto. “There is so much negativity with the American and European debt situations . . . But if all you do is read the headlines, you might think the whole economic system is on the verge of collapse here.”
That’s not the case, Roulston argued during his presentation, titled “Picking the Stocks that ‘Rock.'” The investing world was terrified of the dire consequences of the Greek debt situation, followed by the downgrade of American government debt. But neither triggered a financial collapse, Roulston noted.
“Greece did default on its debt. It’s only a selective default, but they did default on their debt. And the world carried on,” Roulston said, adding there was no “financial Armageddon” as predicted by some if America lost its triple-A rating. “The American debt has been downgraded, and the world carries on.”
Even with the rising fear that the U.S. and Western Europe are dipping into another recession, Roulston encourages investors not to go into hiding. “I’m not suggesting things are in good shape,” he said, pointing out there are serious flaws and uncertainties in the American and European systems. But those problems won’t totally shatter the global financial system.
Though America and Europe may not be doing well, other parts of the world such as China, Indonesia, South Korea and India are growing. As a result, base metal prices are strong and the mining industry is flourishing.
What should investors do?
The real way to play the market is to look at the supply side and not to bet on the prices of commodities, Roulston offered. Gold and silver prices will continue to rise, he predicted, as investors seek a safe haven, but they will be extremely volatile. The prices of other commodities may also rise.
If you look at the mining industry, it’s constantly building new mines to meet demand. And juniors will be the ones to provide those new mines.
“Every decade, 10% of the entire mining industry has to be replaced just to keep production level, and on top of that, we are seeing growth and demand for all the metals.”
Roulston said that in his newsletter he looks for companies that have the potential to be a takeover target for a major. However, he strongly suggests investors to do their own due diligence, and diversify their portfolio to mitigate risk.
Stocks that ‘Rock’
The following are Roulston’s picks, which he presented in alphabetical order during the Cambridge show. Stock prices are their Sept. 15 closing prices in Toronto.
- Alexco Resource (axr-t, axu-x; $8.45)
- Andover Venture (aox-v; 50¢)
- Bear Creek Mining (bcm-v; $4.44)
- Candente Copper (dnt-t; $1.25)
- Fortuna Silver (fvi-t; $6.10)
- Golden Valley Mines (gzz-v; 38¢)
- Kaminak Gold (kam-v; $4.13)
- Lion One Metals (lio-v; $1.55)
- Midland Minerals (mex-v; 8.5¢)
- Newstrike Capital (nes-v; $2.78)
- Silvercorp Metals (svm-t, svm-n, svm-x; $6.90)
Roulston said the fraud allegations against Silvercorp are “nonsense,” but advises investors to be cautious.
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