-- Posted Wednesday, 13 February 2013 | | Disqus
Source: Sally Lowder of The Gold Report
The risk-reward profile of resource companies resemble those of healthcare and biotech companies, according to Brian Post, an analyst at ROTH Capital Partners, an investment bank dedicated to the small-cap public market. Part of Post's mission is to educate his institutional clients about the value to be found in the resource sector. The value to be found in Mexico as a mining jurisdiction is one of the first lessons he offers. In his first interview with The Gold Report, Post focuses on Mexican silver and ventures to both North and South America to talk copper.
The Gold Report: Brian, you started out as an analyst in the industrial sector. What brought you to ROTH and into the resource space?
Brian Post: ROTH saw an opportunity in the resource space, but lacked exposure to it. Once I familiarized myself with the technical aspects, I felt my previous experience was transferable. I now cover precious metals and some base metal assets, and in the last two years we have brought on an additional analyst who looks at resources from a cleantech perspective, which includes rare earths, other industrial metals and renewable energy, including uranium. We plan to build on this platform.
TGR: When you speak to clients in Southern California, are they receptive to investing in resource stocks?
BP: Looking solely at Southern California, investors are sparse. However, my contacts and outreach are global, including accounts in Europe, and we are gaining traction in investment hubs like New York, Toronto and San Francisco.
ROTH is a small-cap, growth boutique bank. Our strategic direction in the resource space has been to educate our existing institutional investor base—those who are comfortable with growth stories—about the value of investing in mining stocks. They are familiar with the risk-reward profile of healthcare and biotech companies, which are relatively similar to resource companies.
TGR: Looking at your coverage list, I see a lot of precious metals in Mexico, including several silver names. What is your rationale for investing in Mexico as a jurisdiction?
BP: Given the geopolitical risk around the world, I made a conscious effort to look at companies operating in Mexico. It is one of the countries most friendly to mining development in today's environment.
From a U.S. point of view, there is concern about some social aspects in Mexico. However, global investors are much more comfortable and there is plenty of opportunity. The Mexican economy is growing, the resources are there and the government appears to have a pragmatic approach to balancing environmental and social protection needs with the economic impact of opening up mining projects. We believe Mexico is the place to be right now.
TGR: Mexico is a premier address for silver, isn't it?
BP: That is a function of the geology; Mexico hosts both silver and gold. My coverage universe has evolved to include a lot of silver names at the present time.
Given the amount of investment and the activity from larger silver players in the region, we are comfortable with the infrastructure and the skill level of the labor force in Mexico. All the ingredients are there for continued development and exploitation of what nature has given the country.
TGR: Would you call yourself a goldbug? A silver bull?
BP: First and foremost, we are price takers. I have a positive bias on both gold and silver and have a stable to favorable outlook on both metals. We are not in the business of predicting price. We are, however, comfortable looking at projects and analyzing cash flows that assume metal prices, costs and cash margins sufficient to support the projects.
TGR: In essence, you believe in the viability of a price that might not appreciate greatly, but will be stable.
BP: That is a fair assessment.
TGR: Let's move back to North America. Are there other names that you like in this part of the world?
BP: In addition to precious metals, we like a handful of copper opportunities.
TGR: We hear talk of a global economic recovery, which would be positive for the price of copper. Do you like copper based on the prospect of a global economic recovery, or do you just like the metrics and valuations of specific companies in the copper space?
BP: It is a blend of both. I am not ready to say I expect a very robust global recovery. But, given the growth in China and other emerging markets, demand for products that use copper remains at a healthy level. Pair that with the fact that some large mining projects around the world have been scaled back or delayed, and I am comfortable assuming the copper price will remain stable enough to give some copper projects a feasible environment. We feel comfortable with copper above $2.75–3/pound to support development of some of these projects.
TGR: Brian, thanks for introducing our readers to ROTH and for sharing your insights.
Brian Post is a research analyst covering the Resources & Industrials sector. Post rejoined ROTH Capital Partners in March 2010. Prior to ROTH, Post was an acquisitions analyst at Cascade Affordable Housing, a $100M+ private equity fund focused on commercial real estate investments throughout the U.S. Prior to Cascade, he held a variety of positions in the investment industry including fixed income management, equity research and investment banking. Post is a CFA charterholder, a member of the CFA Institute and the CFA Society of Seattle. He received his Bachelor of Science degree in finance and business economics from the University of Idaho.
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-- Posted Wednesday, 13 February 2013 | Digg This Article
| Source: GoldSeek.com
