Slater moves from metals to agriculture as favoured investment sector

Respected UK investment guru, Jim Slater, is now looking to agribusiness as the way to investment riches as the supercycle continues and he liquidates his metals investment vehicle, Galahad Gold.

LONDON - 

Talking at a Minesite meeting in London yesterday, British investment guru, Jim Slater, who made a huge amount of money through his, and his colleague, Canadian entrepreneur Ian Watsons' belief in the metals and minerals supercycle, now feels that the time is ripe to switch investment into another sector - agribusiness. Its not that he feels that the supercycle has ended yet, but that the agricultural sector is now at the stage the metals and minerals sector was just a few years ago.

Slater's investment vehicle for the metals and minerals sector was Galahad Gold, which is now being liquidated for the benefit of shareholders after generating huge returns with investments which were made in Northern Dynasty Mines (which controlled the huge Pebble copper/gold deposit in Alaska), the Malmbjerg molybdenum deposit in Greenland and in Uramin with its Trekkopje uranium project in Namibia. All these were acquired at an early stage in the huge price runups seen in base and precious metals and uranium, and sold at virtually the top of the market, so in many respects the Slater skills are those of timing, as well as astute research.

Going back to Galahad Gold, Slater reckons that it was his and Watson's belief in the supercycle concept, plus the search for an investment 'edge' which enabled them to do so well. His criteria for project or company selection was to search for post exploration/pre-production entities with a particularly large metal or mineral resource. As a result of their choices Galahad's IRR over 4 years was a massive 65.8 percent.

Slater also has little time for the thinking of many resource analysts who he bands as "always behind the curve" which he feels gives the canny investor a wonderful opportunity to build a good value portfolio because institutions, reliant on their analysts, can dramatically undervalue mining stocks because of the ultra conservative pricing forecasts which he feels take no account of the paradigm shift in the international industrial situation. Forecasts which he brands as based on ignorance".

The reason he now is switching focus is because he believes the 'low hanging fruit' has already been picked, although he reckons there are still good resource sector buys out there. But agriculture he feels is very much at the stage minerals were only three or four years back.

"Land and agriculture have been terribly neglected" said Slater. The world has a growing population, with growing affluence and grain stocks are at an all-time low. US Department of Agriculture statistics show that production of all grains has not increased over 10 years. Taken with climate change increasing drought in some areas and rainfall in others, coupled with the previously mentioned population growth and affluence agricultural products are going to be in ever tighter supply which is likely to lead to rapidly advancing prices.

The 'edge' in this case, Slater feels, is investment in areas with potential for increasing agricultural productivity and with the basic needs to accomplish this readily available. As a result he is particularly keen on Brazil which has, he says, 15 percent of the world's water, self sufficiency in oil, a huge ethanol business and massive hydropower potential and a GDP growing at around 5 percent a year driven by a flourishing and growing middle class which, to an extent, insulates the country from world economic pressures and disruptions.

The second edge is to go for transformational land - notably that with irrigation potential. Although installing irrigation substantially raises the costs, this can be written off against taxes and the value of the land increases accordingly - as well as the output potential.

Whatever one feels about the principles of switching investment focus, there is no doubt that metals have had a good run and there may well be good opportunities in other areas which are likely to be beneficiaries of the current investment cycle, which could well have another good few years to go yet - and if what Slater says is correct, then some investment into selected agricultural sector stocks could be a wise move.

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