What Resource Companies Are On This Fund Manager's Buy List?

RA: Much of the focus on price action in the gold space up until now has been concentrated on new leadership teams at Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) and Newmont Corp. (NEM:NYSE), and they deserve the attention. The returns on invested capital for both companies have been rising in each of the last three quarters. Their asset sales have largely been completed, and now there are even some investments being made by these companies in the junior space. Barrick bought into Reunion Gold Corp. (RGD:TSX.V) (OTC: RGDFFlast year, and Newmont made a strategic investment in GT Gold Corp. (GTT:TSX.V) (OTC: GTGDF), which has an exciting discovery. So I think the fear of doing a transaction in the gold space is now behind us.

For our Gold and Precious Metals Fund, consolidation is good as we tend to be more positioned in the mid-tier precious miners and that's where consolidation tends to play out. The larger cap miners have had their valuations lifted with the money flows into the exchange traded funds (ETFs), and many analysts are now suggesting that investors look downcap for smaller companies that have lagged. We're starting to see more deals materialize in the mid-tier space, too, and we can talk about that here in a little bit.

I would say for our World Precious Minerals Fund, the tune of underperformance may be changing. For instance, coming off the bottom of the COVID-19 low on March 18, the fund is up 96.32%, while the VanEck Vectors Gold Miners ETF (GDX:NYSE.Arca) and the VanEck Vectors Junior Gold Miners ETF (GDXJ:NYSE.Arca) gained 76.52% and 87.36%, respectively. This is a short time window, but we've outpaced them coming out of the bottom, so I find that to be very encouraging. Over the last few years, we've had an investment mania in cannabis and Bitcoin. They were really competing for the speculative dollars, and mining was not really doing that much. Now those trades have largely faded away, and investors are beginning to sniff out the value proposition that these junior miners and exploration development companies present.

For World Precious Minerals, there is not an ETF available for exposure to these companies, and no other mutual fund has more junior miners and exploration exposure as a percentage of the fund than World Precious Minerals. The seniors, they've touched a toe on some of these stocks, and we're also seeing some activity with the mid-tiers: Alamos Gold Inc. (AGI:TSX; AGI:NYSE) has been taking investment positions in the exploration space with GFG Resources Inc. (GFG:TSX.V; GFGSF:OTCQB) and then Red Pine Exploration Inc. (RPX:TSX.V; RDEXF:OTCMKTS)along with a couple of others. So the miners see the deep value in the space, and they are now buying these names. What we haven't seen is the retail buyer show up yet, so I think that is where the opportunity is. If the seniors and the mid-tiers are buying the juniors, I think it won't be too long before the retail space wakes up and starts paying attention to these names and tries to get a position.

SWR: What are some of the resource companies on your Buy list?

RA: TriStar Gold Inc. (TSG:TSX.V) (OTC: TSGZF) would be one of my top ones. It has a real geological science team of professionals creating value through the drill bit. TriStar's last resource update increased its ounces by a factor of seven. It mainly was because prior to that there was no money being allocated to drilling budgets for exploration. But once it got some money, the resource grows sevenfold. Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) has also provided TriStar some money, so it is continuing to work. It has cash; it is not going to go bankrupt. And this deposit is a Tarkwa/Jacobina-style deposit, but there are modern day analogs of these deposits of this type of genesis right now forming off the coast of Nome, Alaska, and off the coast of New Zealand. The exploration markers for finding more gold in this type of system are pretty well understood now. I was at the site in Brazil in February and got to see a lot of it firsthand. It was a great site visit, and this is, I think, a name that's going to be a big mine at some point in the future.

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Disclosure:

1) Patrice Fusillo conducted this interview for Streetwise Reports LLC and provides services to Streetwise Reports as an employee. She owns, or members of her immediate household ...

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