At this year’s Sprott Natural Resources Symposium, the Investing News Network caught up with Adrian Day of Adrian Day Asset Management.
Speaking about the performance of gold in the first half of the year, Day said he really thought last year the market had turned the corner on a more sustained basis.
“I have to admit I’ve been quite surprised at the lackluster performance of gold and more importantly, the lackluster, very lackluster performance of gold mining shares,” he said.
But in the current market, can investors still make money? Day believes so.
“In a weak market, you have to be much, much more selective as well as lucky,” he said.
The expert also shared his thoughts on “peak gold,” a term he doesn’t like to use much.
“If you look at what’s happened in the last 10 to 15 years really, we’ve had a very significant and virtually steady decline in ounces discovered. And so, that is going to translate into lower production going forward,” he added.
In closing, Day shared his top three stocks for the rest of the year and why he likes those companies.
Watch the video above or read the transcript below to learn more about Day’s thoughts on precious metals. You can also click here to view our full Sprott 2018 playlist on YouTube.
INN: We’re here at the Sprott show in Vancouver. How are you finding the event so far?
Adrian Day: It’s an excellent show. It really is. Given where gold is right now, the level of interest is really quite astonishing. But I think it’s a signal, most of the people here have been around the market for a while. They’re serious people, which I like. When you go to some of these shows, no names mentioned, you get retail people who come and go with the wind. People here are coming because they really want to learn and they’re really serious people.
INN: And speaking specifically about gold, has the market performed as you expected at the start of the year? And what do you think will happen in the second half?
AD: No, I have to admit I’ve been quite surprised at the lackluster performance of gold and more importantly, the lackluster, very lackluster performance of gold mining shares. That surprised me. I really thought last year that we had turned the corner on a more sustained basis, but clearly I was wrong on that. The fact that the stock market has sort of held up, obviously, the fact that the dollar has moved up significantly, and then also along with that, some of the economic improvement in the US I mean, these all really hurt gold.
INN: There’s been a lot of talk about “peak gold,” what are your thoughts and if we are at “peak gold,” what’s next?
AD: Well, I don’t like using the term “peak gold” to be honest, because people then think of “peak oil,” and peak oil had a very geologic meaning, which was we had found the most oil we ever would. With gold, it’s a little bit different.
I think we have definitely had a peak, to use that word, in production for the next several years. You can tell that quite clearly by looking at the amount of ounces we discovered 10 and 15 years ago. When you correlate the number of ounces that you discover with production 10 to 15 years later, and we had a big increase in discovery in the 1990s, we had a big increase in production in the last 10 years; they correlate, obviously. I mean, it’s obvious if you don’t find this stuff, you’re not going to produce it.
Then, if you look what’s happened in the last 10 years, 10 to 15 years really, we’ve had a very significant and virtually steady decline in ounces discovered. And so, that is going to translate into lower production going forward.
INN: In the current state of the market, can investors still make money and what would be the best approach?
AD: Yes, I think investors can still make money. Obviously, in a weak market, you have to be much, much more selective as well as lucky, but the way to make money–I mean, you look at what’s happened this year with Dalradian (TSX:DNA) being taken over, Arizona Mining (TSX:AZ) being taken over, Nevsun (TSX:NSU), the object of a takeover attempt. So, all of these. I think that’s the way to make money in this market.
Then, if you look at some of the really junior companies, companies that have outstanding results do tend to go up. You look at Evrim (TSXV:EVM), for example, 20 cents at the beginning of the year. They had some incredible trenching results, just trenching not drilling. And the stock went up to $1.50. So, you can still make money in this market, but of course, for every one of those we could name 10 or 20 companies that are doing good work, but just haven’t had the sort of a spectacular success. So, you have to be a lot more selective.
INN:For investors that come to this type of show, what would you say are the top three questions they should be asking a company that they like?
AD: That’s a very good question. So, I’m assuming we’re talking about asking questions at juniors?
INN: Yes.
AD: Because obviously, if you are talking to Franco-Nevada, you ask different questions. I’m not a geologist, so the question I want to know about the company, this is me, I want to know about the company and its plans, and its balance sheet, and things like that. Now, if you’re a Brent Cook, you ask totally different questions than I would ask because you’re a geologist, you’re interested in the geology. And I think I’m saying that because I think it’s critical that an investor understands his strengths and weaknesses. If you don’t …read more
From:: Investing News Network