Biography
Mike Niehuser is the founder of Beacon Rock Research, LLC., SLB Equity Research, LLC., and The Colonel John Boyd Memorial Scholarship, Inc. He also provides metals and mining research for Dutton Associates. Formerly, Mike was a Vice President and Senior Equity Analyst with the Robins Group, LLC, a registered broker dealer. Mike was employed by U.S. Bank for 18 years as a lender with expertise in all areas of real estate lending and valuation. He graduated from Pacific Coast Banking School in 1998 and successfully transitioned into investment research to become the RedChip Review's bank analyst from 2000 to 2003. Mike has written hundreds of research reports and related articles on investing in small cap companies. He is a generalist with expertise in recognizing value in under-followed companies in a wide variety of sectors.
Mike joined the faculty of the Pacific Coast Banking School in 2005, following his participation as an Alumni Associate Director and Grader. Mike also served as an elected school board member, serving ten years in Oregon’s fourth largest school district. Mike considers himself to be an example of the life-long learner, graduating from the University of Oregon with a BS in Finance and is currently preparing for the Level III CFA exam. He currently holds NASD Series 7, 63, 86 and 87 licenses.
Q: With spot gold prices remaining steady above $700/oz, I was wondering if you could please summarize in a few sentences, your views and outlook on gold and gold stocks.
A: Gold is currently trading at about the 70th percentile in real terms since January of 1968. This may suggest that gold may be overextended at $700 per ounce. While some believe that gold is headed higher this is really just icing on the cake. From a value or more risk averse point of view, we believe it is more important for the forecasted gold prices to remain above potential costs of production. This is important for companies to have bankable projects and more importantly to be able to raise capital to develop projects and expand/upgrade resources. While all gold stocks seem to be correlated to the price of gold, those with economic projects should fare better over time. We see that with somewhat inconsistent performance in metal stocks at historic highs, concerns in the credit markets, that a new phase may be starting where there is a flight to quality, or to projects that make sense. We remain bullish for companies with good projects and solid management.
Q: If possible can you please give us a summary on how you evaluate/quantify geopolitical risk, in light of Eldorado’s mine being forced to shutdown in Turkey and the unexpected suspension of Gabriel Resources’ environment impact assessment due to NGO opposition?
A: I can’t speak to the two stocks you mentioned because I do not cover them. We are bullish on metals stocks but assuming there is an equal number of winners and losers we attempt to compartmentalize risk. In the real world, risks are often related and become apparent in real and horrifying ways. In general, when selecting metal stocks, we look at political and permitting, project characteristics including expansion potential, and management. We assess these issues in relation to each other, relative to where a specific company is in relation to its peers, and in relation to its own development plan. We also attempt to isolate the critical path items which may hold a project up and cause it to lose the confidence of investors.
Q: Lastly, among precious and base metals, can you please highlight one metal (and its corresponding stocks) that you believe to be overbought and due for a correction and one metal that you believe to be oversold and due for a bounce and why.
A: We have a long-term perspective. In any event, with the rise in metal prices, from a long-term perspective, values of most metal stock seem reasonably under control. It comes as no surprise that with historic global growth all precious and base metals may be expected to remain in demand for some time. For this reason, while all metals are well above their average real price over the last hundred years, we may be in a very long metal cycle substantially above historic levels. It would also appear that continued worries regarding additional supply of metals coming into the market may be overdone. The greatest concern from a near term perspective is good information coming out of previously closed systems such as China. From a longer term perspective, should increasing demand persist without a complimentary rise in supply, prices will increase and stabilize. Until prices rise to the point of increasing inflation and slowing economies prices will remain high, if this doesn’t occur in an orderly manner, there could be great and unsettling consequences (depression, war, etc.).
Thank you, Mr. Niehuser!
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