The BarkerLetter

I rather doubt it. He reportedly shies away from companies that rely on a single commodity, unless there is something very distinctive about them. He also seems to avoid cyclicals, steel and forest products, etc.

He does invest in commodity plays though: I´ve seen oil and gas companies on Berkshire’s list.

I think it’s more likely that he knows something about the oil industry, but doesn’t know anything about mining. Investors, the good ones, avoid getting involved in something they know little about, and that includes entire industries as well as sectors.

So this beggars the question: Why doesn´t Warren Buffett know enough about mining to invest? Or by extension, why do the majority of investors out there know nothing about it? Probably because nobody ever bothers to explain it to them.

I think we missed the boat here. I think if someone had called him up, or written him a letter 20 years ago with a list of 10 or 12 investment criteria specific to the industry, he may have become interested enough to learn something about it. I’m sure he’s had lots of pitches. I guess none of them cut it.

And you know what? I’ve never understood that rationale of not investing in something you don’t know. What, like you just never go there? Whenever I stumble on something I know nothing about I’m always interested in learning it.

I suppose Berkshire Hathaway looks at mining as a flavour of the month. Sure, lots of uninformed investors will invest in it when the market is high, and when it’s down, they flee. So you get ups and downs. Only the elite stay in during a market like this because there is no margin for error.

But the last time I looked at a long term chart for metals, the general trend was up. Do you think these guys are just plain wrong?

I think it’s a shame that mining hasn’t been a part of the biggest public investment story of the 20th century. I’m going to take one more kick at the cat by printing this letter and sending it to him - via the mail - complete with a coffee stain and handwritten address scrawled over the envelope, and postmarked Costa Rica. You’d open that wouldn’t you, if you got it in the mail? Anyway, I’ve heard that things are changing at B.H. Things are changing everywhere.

Meanwhile, there´s no reason why we shouldn´t be pitching the next Warren Buffett, wherever he may be.

On an upbeat note…

I got a letter recently from a guy who did a presentation at the Cambridge Show in Toronto, Canada last month, a day or so before the big melt down. Three hours before kick off he tore it up (I bet a lot of presentations were torn up that week) and just pitched a series of questions that joe investor needs to be asking about the companies they want to buy. He says he saw people who were leaving turn around and come back to listen. Ha! Talk about thinking on your feet. We all need to do that nowadays.

Moreover, his company, Northland Resources (NAU.TSXV) is doing some of the right things in my view. They have a handful or advanced base and precious metals projects - notably iron - going on over in Scandinavia. The company has developed a long term policy with respect to both those projects and the region, to the extent of moving their entire operational base to Europe. Best of all, they’re publicly stating it.

If I were a stakeholder there, I’d roll out the carpet for a company with $150 million in the bank and a stated desire to contribute to the local tax base and employment for the foreseeable future. Especially with banks melting and pensions in peril and the unemployment lines growing. I think this sort of commitment is going to be weighed very carefully around the world in the months and years to come.

The other thing Northland has going for it is the guy at the helm, Simon Ridgway. People, when you buy management you have to do more than look at resumes - you need to look at where the principals are in the trajectory of their careers! I know for a fact that Berkeshire Hathaway does this, even though they don’t share it with the rank and file investors (but I will!). The serious players in the mining business are not interested in staying where they are - they want to move up and on.

Back in the ’90s, Ridgway made a name for himself by discovering the 1.5 million ounce San Martin deposit in Honduras, which was later acquired by Glamis. Do you think he wants to find another one? Well sure. But Ridgway seems more interested right now in what Northland has cooking over in Finland and Sweden, so I’m tempted to think that’s going to be the locale for the next move in his career. My best guess is that he sees himself at the helm of the next Boliden in a few short years. Frankly, I think he has a pretty good shot at it.

Bottom line: When you watch the parade to the post, try and pick the horse that looks like it will go the distance. Mining is a tortoise and the hare thing. It doesn’t matter when the race gets finished, as long as it does.

Kb