I had the great opportunity yesterday to connect with legendary resource developer & financier, Ross Beaty, founder and chairman of the $2.7B Pan American Silver Corp., and executive chairman of Alterra Power Corp. Throughout his 37 year career, Ross has generated an astounding sum of over $4B worth of shareholder wealth.
His comments during this amazing interview, describe a screaming ‘pressure-cooker’ global environment for commodities, with sustainability, declining discovery rates, depletion, and resource nationalism all but choking off supply-side growth.
“We are hitting walls of sustainability,” said Ross. “Discovery rates are declining in metals and in oil & gas, much less is being found than is being consumed, and all of these patterns whether it be use of water, use of land, depletion of soil, inability to replace energy consumption as is being consumed…When you look at all those things [you see] there’s a lot of constraints to our economic system today…The world will hit those constraints, and that’s going to be a brake on things like economic growth, and things like commodity consumption growth.”
Speaking on the supply-side Ross added that, “Nothing that affected the supply-side challenges we’ve seen in the last few years is different this year. If anything, supply challenges are greater. Social issues, environmental issues, political issues, resource nationalism by many countries, all of these things will constrain supply responses to high metal prices…There will be lots of shocks to cause prices to go up and go down this coming year I think.”
When asked about record sales seen recently in silver bullion products, Ross commented that, “Because of the world’s indebtedness…particularly the U.S., there will be continuing weakening of global currencies and increasing monetary flooding of paper currency supporting hard currencies like gold and silver. I think metal prices for those precious metals commodities will continue to trend higher…Look at the ETF & coin demand, and you’re seeing continuing demand for silver as a monetary product, just like gold…it’s a tendency of people to want to buy physical metal as an alternative to paper money…it’s been a great bet, and I see that continuing.”
When asked about the tough resource share market for investors, Ross said, “This is a really good buyer’s market today, there’s great value in exploration companies…it’s a far better time to invest than say the beginning of 2011 when prices were at the top, and so I think people should look at an out of favor market. That’s when money is made. It’s when nobody else wants to invest. It’s when the best investments are made…I think it’s a very good time to invest right now for anybody looking at this particular sector…The tide is out…[but] any improvement in the macro market which brings investors back into the space will cause improvement in the share prices pretty much across the board…We are in a super-cycle [for commodities], metal prices are proving that…[so] you’ll see lot’s of capital gains being made in 2013.”
In a concluding word to investors looking to profit in resources, Ross said, “Over the long-term cream floats to the top, and a well-run company that is financially & operationally strong, with it’s greatest asset[being] it’s people…will do better than other companies, and generally speaking will outperform the market.”