Kevin Bambrough, Sprott Resource Corp.: "Unbelievable Values in the Public Markets"

Kevin Bambrough, Sprott Resource Corp.
Source: The Gold Report 11/21/2008

"One of the reasons I first started the Resource Corp. is that I didn’t find much value in the public markets last year and I was looking for opportunities to arbitrage between private and public markets. The world’s changed so much since then; there are now just unbelievable values in the public markets. A number companies out there have spent considerable amounts of money over the last number of years—vast, vast sums—building infrastructure, mines and mills, making huge capital investments. Now they’re trading at pennies on the dollar to what they’ve spent and the assets they’ve accumulated. In the current metal pricing market, they’re cash burners and uneconomic because things are so depressed. I’m not concerned that these prices may stay depressed for some time. I’m more concerned about the long term.

There are always cycles in the commodity markets and you get opportunities to buy assets extremely cheaply during the lows. That’s when you want to put your capital to work. So we’re cashed up and ready to put our money to work. If we can buy a company for pennies on the dollar for, say, its mill and I get the ore body and the infrastructure for free and I can let it sit on care-and-maintenance until times improve, I think we may get the chance to make 10 or 20 times our investment over a five- to ten-year period—an absolute killing. This is the market that I’ve been waiting for and hoping for.

I was surprised how far the first big run in the bull market in commodities went. I’d been very cautious and waiting for a correction for quite some time, and now we’re getting it. Going into this year, I was really only excited about metallurgical coal and agriculture, which is why I focused on PBS and getting our phosphate asset in Peru moved along. I still am very optimistic about the long-term value that’s going to be shown in that asset because the fertilizer market looks very bullish long-term."