Price of gold is way up, but these Hot Picks in gold plays still have room to run: portfolio manager

Price of gold is way up, but these Hot Picks in gold plays still have room to run: portfolio manager

at this time during trading day we bring
you hot picks today it’s gold plays now
the price of gold still near those
record highs above 2,500 got to just a
couple of weeks ago our guest says the
gold miners and gold equities haven’t
seen the same kind of bump and that’s
certainly borne out by our chart there
look how the TSX index of gold stocks
has lagged the price of the metal we’re
joined by Alysa Corran deputy chief
investment officer at coperni global inv
s Alyssa thanks very much indeed for
coming on the
show thank you for having me can we just
jump in because I’ve got to get your
take on on barck gold it has been an
underperformer um relative too eagle or
numont for example but you see potential
there absolutely and and baric is just
one of the many gold mining companies we
have in our in our fund but baric has
gone through a transformation over the
last 10 years going from a a company
that you know was probably mismanaged
and then they diluted themselves and and
bought a good management team so now
what you have was is a a company that
has very very good assets a very good
management team a strong balance sheet
huge resour resources so they are very
well positioned for the future and like
other gold companies they are in half
from from
2011 even though the gold price is is
higher than when we saw in 2011 so it
it’s interesting that the gold mining
companies have yet to realize that that
gold is near its all-time
high why has barck I lagged the likes of
Newmont and ago
though I think that there are some
companies that are are deemed better
than others um and numont at times
trades at a premium to baric
and we have a joke that if you if you
moved bar into the US you would suddenly
get a a bump in their valuation maybe
that’s going on right now too but but
Newmont has generally been better
managed historically they also did a
fantastic deal with with newrest
recently um numont actually is a larger
position in our portfolio than barus so
we so we like numont too um both are
both are very good they both have this
the same properties in Nevada so really
should this disconnect be there we don’t
think so um but both are are very good
companies with with very good resources
interestingly with the the new M and new
Crest
acquisition we have noticed that these
big companies are buying each other
where these big companies are are
depleting every year that they mine
they’re depleting their their asset base
and they need to replenish that what
they should be doing is buying companies
like like stbridge which is another pick
of ours okay this is a this is these are
companies that have small caps but
massive resource we’re not interested in
in owning the the junior money companies
that haven’t found gold because it’s
very difficult to do that but the ones
that have they’re trading at a huge
discount to the producers like like
baric and numont Ando Eagle um that you
know have have frankly a good reputation
but also are producing and I’m producing
cash flow today that’s your next idea C
bridge I seem to remember that they’ve
been working for years on an absolutely
massive golden copper mine in BC but it
would be expensive to develop
it absolutely which is why you need a a
company like baric or new or even a
frankly a big copper company this is a a
company that has a massive gold resource
to put this perspective they have 50
million ounces whereas w Barrack’s
entire entire gold resource is 180
million ounces can you imagine you know
if if a company bought seab Bridge they
could replenish their resource for for
decades um so to us it makes sense that
it would attract these these Partners
but it’s going to be a partnership of
probably a couple mining companies this
is a huge
capex uh build it’s going to cost
billions and billions to to bring this
out of the ground and so this is not
going to happen tomorrow and I think
that is also the opportunity because if
you don’t have patience if you have a
short-term
Horizon you know why bother with with a
company like Seabridge we say this is an
asset that will be developed that’s
worth multiples times of where it’s
trading today if this takes 10 years you
know you still get huge Returns on that
patient your irrs are are double digits
so
that’s the sorts of things that we’re
finding with with companies of the seab
bridge ilk now this is part of a
diversified portfolio as I mentioned
this is just one of many because risk
mining is a a very Risky Business
there’s lots of things that that can go
wrong in mining companies um and your
final idea wheat and precious metals uh
that would be one of your favorite
streamers right
now yes and so all these companies fit
together like so they bars need the seab
bridges and the wheatens provide the
financing to the barracks that that
build these mining companies and wheat
and precious is is a great it’s a
well-managed company they have a strong
balance sheet they’re they’re very large
so they can compete with the likes of
Royal gold and and Franco Nevada and
their assets are are phenomenal so this
is a company where the management team
has has invested counter cyclically
they’re taking advantage of op
optionality which a lot of management
companies don’t understand and and
aren’t valuing what what do you mean so
yeah absolutely it’s I’m sorry what do
you mean by
optionality yeah so optionality is
really seeing that there’s not just one
path so what happens is that investors
forecast one price and then they they
don’t
value the the fact that the prices could
rise or there maybe there’s more ounces
in the ground um so so many of these
companies like
Seabridge that optionality is is not
being valued they say oh it would take
more than $2500 to get it out of the
ground today worthless there is a value
for this company there is a value if if
you know it trade’s almost like a call
option where if suddenly gold is 2500
$2,700 this the the company’s worth
multiples so that’s the sort of
optionality that is is not being priced
in because investors are so focused on
cash flow today so if you could think
about it the opposite of optionality is
a DCF model where where time is is your
enemy with options time is your friend
and so you you want these companies that
will be around for a long time when you
use a DCF
model you know after 20 years there
there’s no value so that is a is a big
Mis misconception in the mining industry
today Alissa we’ve only got 10 seconds
what gold fund what is the gold fund
that you’re involved with what’s its
name we we run a a mutual fund the
global all Cap Fund cernick Global
Investors okay

Gold equities haven’t kept up with the price of gold, and that presents an opportunity, says Alissa Corcoran, deputy chief investment officer at Kopernik Global Investors.

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