BMO’s Andrew Kaip: The Gold Majors Are Back

The Gold Report: You recently became managing director of mining equity research at BMO Capital Markets. What kind of overview of the gold and silver sectors does this position entail? Andrew Kaip: Taking one of the lead roles at BMO Research has given me the opportunity to step away from the day to day of covering stocks. Supervising a team of analysts allows me to spend more time thinking about where we are in the gold and silver cycles and the implications for investors. That’s precisely what we did when we launched coverage on the senior gold producers. TGR: So where is gold in its current cycle? “Asanko Gold Inc. is one of the opportunities in what we call predevelopment names.“ AK: At BMO, we’ve kind of stuck our neck out after some deliberate thought, and we’re suggesting a lot of similarities between 2001 and 2015. The price of gold … Continue reading

Experts’ Guide to Getting the Most Out of Company Presentations

Trust, But Verify: Jayant Bhandari, a fund adviser, recently published a guide called “High Risk, High Reward: Disciplined Junior Mining Investing” that suggests comparing company presentations to the annual reports usually available on the company website or at sedar.com. “It is not illegal for companies to fail to provide you full information in these presentations,” he cautions. For example, a company might show in the presentation that it has $5 million ($5M) in cash, but might not mention that it also has $50M in long-term debt. Or a presentation might feature a project without telling you that the company doesn’t currently own it. “As you dig deeper, the incongruities that you discover between what they show in the presentation and what they actually have tell you a lot about their integrity, who they think they work for, and what respect they hold for you, the owners of the company,” Bhandari … Continue reading

Experts’ Guide to Getting the Most Out of Company Presentations

Trust, But Verify: Jayant Bhandari, a fund adviser, recently published a guide called “High Risk, High Reward: Disciplined Junior Mining Investing” that suggests comparing company presentations to the annual reports usually available on the company website or at sedar.com. “It is not illegal for companies to fail to provide you full information in these presentations,” he cautions. For example, a company might show in the presentation that it has $5 million ($5M) in cash, but might not mention that it also has $50M in long-term debt. Or a presentation might feature a project without telling you that the company doesn’t currently own it. “As you dig deeper, the incongruities that you discover between what they show in the presentation and what they actually have tell you a lot about their integrity, who they think they work for, and what respect they hold for you, the owners of the company,” Bhandari … Continue reading

World’s Increasing Appetite Points to Upside for Ag Input Companies: Paradigm’s Spencer Churchill

The Energy Report: Do you rely on the stock-to-use ratio to predict grain prices and, if so, what is it telling you right now? Spencer Churchill: Yes, we do. Stock-to-use is a good way of assessing the degree of tightness in any crop market and hence how much underlying support there could be for prices. The lower the amount of “buffer” there is—the amount of stocks or inventory relative to the total usage or demand—the tighter this market could become and the greater the likelihood of higher prices. In North America, by ranking of lowest to highest stock-to-use ratio expected for 2015–2016, we would expect price support/appreciation for 1) canola, 2) soybeans, 3) corn, and 4) wheat. TER: How is the drought in the Western U.S. impacting projections for ag prices in the coming years? SC: The states most affected by the drought are generally not large producers of the … Continue reading

Six Miners Dundee’s Joseph Fazzini Believes Will Weather the Storm

The Gold Report: Many of the people we interview have a theory about why gold is performing poorly this summer despite so much global uncertainty, especially in China and Greece. What’s your theory? Joseph Fazzini: Gold typically plays numerous roles, including being a hedge against inflation, devaluation and economic turmoil, but it’s still a commodity. Most commodities typically come under pressure in a recessionary environment. Right now, the global economic landscape isn’t all that promising, inflation remains minimal and investors prefer other safe-haven investments (i.e., U.S. dollar). As a result, we expect gold to continue performing in-line with most other commodities and remain under pressure. TGR: How low can gold go? JF: Recent events have shown that the price of gold can move without rhyme or reason. While some have suggested that opportunistic investors have conspired to drive down the price of gold, weakened investor sentiment has also played an … Continue reading

Luisa Moreno Explains Why Metallurgy Is So Important in Critical Metals Projects

The Gold Report: With development capital still at a premium, are companies with critical metals projects getting financed? What typically gets financed and what doesn’t? Luisa Moreno: The financing environment for the mining space is still difficult, and that is no different for the critical metals equities. Nowadays, the mining and related processing projects that are more likely to get financed are those that are close to production, have relatively low capital requirements, have competitive production costs, have offtake agreements or will be selling into metals markets that have seen prices stabilize and have solid demand. TGR: In July 2011, you produced a tantalum and niobium primer for Jacob Securities Inc. Reading through that report again, little has changed. What makes these metals newsworthy now? LM: Tantalum has major applications in electronics that are used in nearly all devices that we have in our homes. Niobium is a major metal … Continue reading

Winning the Hunger Games: Tom Wallace on How to Choose Successful Agriculture Investments

The Energy Report: Is investing in agriculture like investing in any other commodity, or do investors new to the space need to get familiar with special considerations? Tom Wallace: Agricultural investment is composed of a multitude of subsectors, so when it comes to making an investment decision, investors need to focus their efforts. Agricultural investment encompasses everything from a sheep and beef farm in New Zealand to a phosphate mine in Brazil. We’re talking about very different operations that come under the same banner of agriculture, but some cross into other sectors. Obviously, fertilizer is directly related to agriculture, but a phosphate mine, for example, is part of the mining sector as well. You have those considerations to take into account. The fundamentals that support growth in agricultural commodities are different from those of other commodities for a number of reasons, the main one being that people have to eat. … Continue reading

Salman Partners Economist Calls Bottom in Copper

The Gold Report: You recently wrote a paper called “Stagnation: The New Paradigm?” where you put current commodity prices in perspective by showing charts going back to 1999. What happened over the last five years in iron ore and copper and what can we expect going forward? Raymond Goldie: The price of iron ore from 2011 to 2015 dropped more than 70%. If you look at the other great indicator of the mining industry—the price of copper—you find a similar, but smaller, decline over the same time period. [Copper chart located above. Data: London Metal Exchange.] TGR: What were the fundamentals both behind iron ore and copper’s astronomical moves up going back to 2004 and the subsequent falls? RG: Iron ore prices really started to rise in 2008 because of increasing demand for infrastructure needs globally. Copper received added attention in China as it became seen as money right alongside … Continue reading

Stefan Ioannou’s Ways to Ride the Next Zinc and Nickel Waves

The Gold Report: In late June, zinc and nickel prices on the London Metals Exchange (LME) dipped on concerns surrounding the economic fallout from Greece exiting the Eurozone. What’s your view? Stefan Ioannou: When the referendum was first announced in late June there was a big reaction. There is no doubt the issue is a political crisis. However, unless you live in Greece, the actual financial impact is questionable. That’s not to say that it hasn’t justifiably sparked concern for the well being of the greater Eurozone. Although there is now better clarity regarding the European Union’s bailout package, the jury is still out on the ultimate implications of the situation. Nevertheless, we expect general market sentiment regarding the base metals will continue to be centered on Asian demand. Looking further ahead, we continue to anticipate a lack of timely new mine development will lead to a supply constrained market, … Continue reading

Baby Steps: Mackie’s Bill Newman Finds Oil & Gas Plays that Produce No Matter What

The Energy Report: With the collapse of the crude oil price and the timing of a recovery difficult to predict, the energy sector has fallen out of favor with investors. In the current oil and gas investment climate, are there any stocks that are immune to the negative sentiment and can still perform? Bill Newman: Yes, there are. But investors need to choose companies that are decoupled from oil prices in the short term and have other drivers that can gain investor attention to move the stock price up. And yes, you’re right. The sector is out of favor right now, so investors should look for companies that don’t have to rely on accessing the debt or equity markets, and are able to fund operations with internally generated cash flow. “The real upside in Pan Orient Energy Corp.’s story in the near term is exploration drilling in Indonesia.” Also, we … Continue reading