Ross Beaty: Favorite (and Least Favorite) Commodities Right Now

With countries around the world on various levels of lockdown due to COVID-19, web-based events continue to offer investors a chance to connect with industry leaders.

On Wednesday (April 8), Grit Capital hosted a Masters of Mining webinar featuring major names in the resource space. Among the participants was Ross Beaty, who has a reputation for running a slew of successful mining companies and financially backing many more.

In a brief talk, Beaty covered the commodities he likes and doesn’t like in the current environment, sharing his views on where there is potential for profit. Read on to learn his thoughts.

What Ross Beaty likes…

Beaty spent his webinar slot talking mainly about the commodities he’s bullish on at the moment, with the top two being precious metals gold and silver.

Unsurprisingly, those metals are directly reflected in the companies Beaty is behind right now: established producer Pan American Silver (TSX:PAAS,NASDAQ:PAAS) and rapidly growing miner Equinox Gold (TSX:EQX,NYSEAMERICAN:EQX). He also has exposure via multiple other investments.

“I see just fabulous fundamentals for gold and silver, really as good as I’ve seen in my career, my 45 year career,” said Beaty. He believes a secular bull market in gold and silver began in 2016 and is now in its fifth inning — the top of the fifth inning, to be exact.

“Gold has had a pretty good run from US$1,050 (per ounce) to US$1,650 or so today, but I can see it going well over US$2,000. It could be quite an explosive up rally as the cycle gets into its later stages.”

Worldwide stimulus is the main fundamental factor that Beaty sees buoying gold and silver.

“Every time governments try to print money and stimulate economies, which is what’s happening globally right now, gold is a beneficiary, gold goes up. And so I’m very optimistic that the price of gold will continue to rise, as well as silver,” said Beaty.

He did note that silver’s duality as both a precious and industrial metal means that its outlook is mixed.

“If we have a synchronized economic recovery, plus a good market for gold, you’re going to see silver probably outperform gold,” he said.

“But if we have a modest market for industrial metals, the industrial economy globally, but still (have) … pressures on all kinds of governments to stimulate their economies, you’re going to see higher and higher gold pries, and (gold) would probably outperform silver in that scenario.”

Finally, Beaty feels strongly about copper, which he sees as “fundamentally an energy metal.”

“Copper I’m very bullish about, I think copper’s got a great outlook,” he said. “I would buy the big copper companies — First Quantum Minerals (TSX:FM,OTC Pink:FQVLF), Teck Resources (TSX:TECK.A,TSX:TECK.B,NYSE:TECK), those kinds of companies — and lots of the copper mid-tiers and juniors just across the board, have a diversified portfolio.”

…and what he doesn’t like

Although Beaty is bullish on gold, silver and copper, he was careful to mention that he isn’t optimistic about all commodities — in fact there are several that he’s not interested in at all.

“I wouldn’t buy everything today. It’s not really 2009 all over, it’s a different kind of a crisis, a different world, and there’s other things that are going on,” he explained.

Here are the markets that Beaty said he is less enthusiastic about right now:

• Oil— “I would stay miles away from oil,” he said. “Oil is sick for many, many reasons.” Overall Beaty believes the problem with oil is the “toxic combination” of low demand due to issues like COVID-19, and high supply caused by factors such as new shale oil and shale gas developments.
• Uranium — Beaty was somewhat positive on uranium, saying that he likes it. “But it’s not a good commodity today because nuclear reactors are simply too expensive,” he said. He thinks they can’t compete with renewable energy, particularly as utility-scale battery storage systems gain traction.
• Thermal coal — “I wouldn’t go near thermal coal,” said Beaty, adding that he sees it as a “dead business” that will fall by the wayside due to climate change requirements.
• Metallurgical coal and iron ore— Beaty grouped met coal and iron ore together, saying he’s 50/50 on them: “I think the big years of infrastructure buildout, particularly in China, are over, and the demand for iron ore and met coal thus … is going to be diminished moving forward.”
• Zinc, nickel and lead — “I (have a) moderate outlook — any kind of company that has those metals should do okay because they’ve been beat up so much,” said Beaty. “(It’s a) reasonable investment for certain companies.”

Other major names in the mining sector also took part in the Grit Capital event — stay tuned for writeups on what Rick Rule and Eric Sprott had to say during their segments.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.