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Published 04 September 2012 08:53, Updated 05 September 2012 14:32
Billionaire investor Frank Giustra says the resources market is in the worst state he’s seen, but that’s not stopped him from pumping his money into junior mining plays. Source: ceo.ca
Via website ceo.ca comes an interview with Canadian billionaire Frank Giustra,who delivers a grim view of the current state of the resources sector, but advises that there are good opportunities for investors who do their research.
Giustra had a hand in resources companies including Wheaton River Resources, Petro Rubiales and Urasia Energy, as well as founding independent film outfit Lions Gate Entertainment.
His current activities include serving as CEO of Fiore Financial Corporation, which provides exclusive advisory services to Canada’s Endeavour Mining Corporation. He’s also been a smart player in gold, moving heavily into the precious metal in the early noughties, when it was trading under $US300 versus its current value in the $US1600 range.
“The resource market is in the worst state I’ve ever seen it in in the 34 years that I’ve been trading stocks and I think it might stay bad for a little while longer but I think it will turn around,” he tells ceo.ca.
”People usually connect irrational and stupid market behaviour with peaks of markets, but it takes place at the bottom of markets too. And it’s just as bad [at bottoms] … fear is a much stronger emotion than greed, so the sense of hopelessness some people might have about the resource sector right now is something that you know if you’re logical about it, it will change. It’s not going to stay like this forever. If you lose complete faith, you just have to give your head a shake”.
Giustra goes on to touch on junior resources plays, highlighting how some are trading at “levels I never would have imagined” but that he’s also piled a bunch of his money into the sector in anticipation of a rebound.
“These are companies with real assets. I’m not talking just about exploration stocks, I’m talking about companies with either world-class assets or developing world-class assets that are trading at pennies on the dollar in terms of valuation.
“So what I’ve done over the last 18 months is taken a very significant chunk of my wealth and chosen a whole stable of these companies that I feel meet my criteria. My criteria is great assets, great management, grossly undervalued and, most importantly, that in my view are able to weather this storm however long it might take without massive dilution – without having to go to the equity markets to raise money when their shares are trading at pennies on the dollar”.
He continues: “If I were an investor out there I would really start to think about the fact that this will change and look at value and buy it: pick right, sit tight”.
Giustra also thinks there’s still mileage left in gold, saying “I believe it’s going a lot higher … it’s going to have a parabolic spike, caused by some event or some loss of confidence … a US dollar crisis would be a perfect example. That will cause gold to go through the roof, and then everybody will want to own it … I don’t think we’re even close to that yet … Gold will probably have a much greater run than some of the other hard assets–because it’s also a currency.”
Here’s the full interview, including Giustra’s views on inflation, agriculture and mentorship.<iframe width=”646” height=”397” src=”http://www.youtube.com/embed/9o30gNfPq_k” frameborder=”0” allowfullscreen></iframe>
You’ve read the Canadian view, now take a look at Why you should stick with major resources stocks.