Justin’s note: David Forest, editor of International Speculator, is our go-to guy when it comes to anything in the natural resource space.
He spent the last two decades of his career searching for new discoveries and breakthroughs in commodities… the mining industry… and resources overall.
And he’s made money.
You see, he helped develop the sixth-largest platinum-producing district in the world… discovered over one billion pounds of copper in Asia and South America… and was the first to be granted a modern exploration license in Myanmar’s emerging economy.
He knows which regions to focus on – and perhaps more importantly, which to steer clear of – through his constant boots-on-the-ground research.
It’s his bread and butter… and today, he shows just how important that is when it comes to a key indicator…
By David Forest, editor, International Speculator
Traditional investors and resource investors look at plenty of indicators… boring stuff for most people, like balance sheets, trading multiples, and debt burdens.
But when it comes to natural resource investing in particular, there’s something even more important.
Almost everyone misses it… But it’s so simple and critical to the success – or failure – of a project.
And that’s its location.
Even a top property will never become a mine in the wrong place. The flip side: When a region gets hot, its whole slate of stocks can take off together.
Geography – and the potential risks that come with it – has to be at the top of a resource investor’s due diligence checklist.
Some key questions to ask about a region’s risk profile:
When are the elections? When could new governments take over? Will the incomers meddle with laws that drop the value of your investment?
Is it safe? There are African and Central American states where even getting on the ground is risky. No one will work there and few will invest.
Is there local support for mining? This isn’t just for developing nations… Even in leading jurisdictions like Canada, issues with First Nations, for example, can derail a project. Without support from such groups, no company has a chance to build a mine.
To avoid collapses, investors need the answers to these questions… and the best way to get the real story is on the ground.
The glossy, thousand-foot views on Reuters or MSNBC just don’t cut it.
How We Cut Out the Thousand-Foot Views
Below is a shot of my car in the Altai Mountains of Mongolia. This is an out-of-the-way country. And I’m in one of the most deserted sections of it.
But the geology here is phenomenal. The quartz veins in the foreground are absolutely huge. That’s a great indicator for big gold deposits.
While there, however, I looked into the political and permitting situation…
And I found an absolute mess.
At the time, the Mongolian government was trying to launch a new round of mining projects. But my sources told me it would likely take hundreds of thousands of dollars just to get started with new licenses here.
Based on that and other difficulties, I decided to steer clear of Mongolia. I’m keeping an eye out for a change in politics. If that happens, we’ll swoop in on this prospective geology.
Compare that to a place like Nevada, which I’ve visited twice already this year.
That’s me in Nevada in February… even a snowstorm couldn’t stop my due diligence.
Because being here talking to industry insiders is critical.
On that trip, I heard firsthand how companies are able to get drill permits in Nevada within a few days. That’s absolutely lightspeed. I’ve permitted drill programs around the world. The permits often take months, even years.
Plus, in Nevada you can stake new properties for a couple hundred bucks… I have personally done this and can confirm it was pain-free. (Fun fact: In some places in Canada, it’s even easier to stake new projects. You can do it on a computer while sipping your morning coffee.)
These kinds of details confirm this place is open for business. Quick permitting means faster drilling, lower costs, and more results coming out to potentially lift a stock.
Why We Make These Trips
At Casey Research, our boots-on-the-ground analysis is invaluable… and it starts with the right background.
We understand that not everyone has the ability to travel to Mongolia… or drive around rural Nevada… or hike through the remote jungles of South America.
But you can still do research.
One of our go-to sources is a Canadian think tank called the Fraser Institute. You might never have heard of it. It’s a small shop focused on niche markets like mining.
Every year for the last decade, the Fraser Institute publishes its mining survey index. This ranks mining jurisdictions around the world. It looks at the ease (or not) of politics, permits, and people in all of the spots globally where junior mining companies operate.
The Fraser Institute’s mining survey goes even deeper than the country level. For major mining nations like Canada, Australia, and the U.S., the survey ranks individual states and provinces for their mining friendliness.
Take a look at the level of detail in the most recent rankings. The map below shows the top five places for mining worldwide – down to the exact location.
Top of the ranks: Nevada, Western Australia, Saskatchewan, Quebec, and Alaska.
And following those top jurisdictions has been a winning strategy lately.
Nevada snagged the Fraser Institute’s No. 1 spot for mining – and with my boots-on-the-ground research confirming how friendly it is for mining, it’s no secret why.
Plus, Nevada has been an epicenter of mergers and acquisitions. Gold majors have been on a buying spree here in 2019. At one point earlier this year, over $28 billion in deals was on the table. (Check out this Dispatch article in which I shared the details with you.)
But the Fraser Institute doesn’t just show the best spots on Earth for mining…
Here are the lowest-ranked spots:
Venezuela, Argentina’s Neuquén province, Nicaragua, Guatemala, and Panama all get the thumbs down.
Most of those places don’t have much of a junior mining sector right now. But I’ve traveled to some other spots where the boots-on-the-ground view raised red flags.
And until change comes in those places, I’m staying away from them. Not only will companies struggle in these places, but most investors will take a hard pass – making it extremely difficult for project developers to raise the necessary funds.
So when looking for resource investments… stick with the best. Always be checking your assumptions. Do your research.
And remember – things may look good from a thousand feet up… but might be really messy on the ground.
Editor, International Speculator
P.S. As I mentioned above, I’m always in the thick of the mining and resources industry. Every month, I do extensive boots-on-the-ground research for my subscribers… I travel all around the world to find the best investing opportunities for my International Speculator newsletter.
And what I recently found may be the best money-making opportunity I’ve come across in my career.
As I’ve been telling my readers, I believe a massive commodities boom is right around the corner. But there’s one specific commodity that I believe should be on everyone’s radar.
In short, we’re about to witness the birth of a brand-new, $9.6 billion market. And you can get in on the ground floor.