Management, cash and assets: Roulston's three buying criteria
With "everything beaten down across the sector," Laurence Roulston calls on investors to differentiate between junior miners with assets, cash and value-adding management teams and those without, if they want to enjoy great future returns.
Roulston, an editor and geologist with 25 years in the resource industry, sat down last week with Scott Gibson of Kitco Gibson Capital to discuss present opportunities and trends amid the junior market destruction.
"What has happened over the last number of weeks…has been absolutely horrifying."
"I've never seen this kind of destruction."
"Longer term, of course, it's a blip that we're going to look back on…but we need to get through this time, it's brutal."
Roulston is a proponent of the bifurcation theory, which sees the junior miners split into two distinct groups: the undervalued and the overvalued. Even companies trading at a penny can be overvalued, says Roulston, if they are without real assets and strong management.
But he says there are "great assets out there trading for absolutely nothing," and the smart money – increasingly from private equity and Asian investors – is already finding its way into those companies with assets and management capable of producing cash flow in short order.