Ryan McIntyre, CFA, is a Portfolio Manager at Tocqueville Asset Management L.P. He serves as a Co-Portfolio Manager of the Tocqueville Gold Strategy as well as the Tocqueville Gold Fund. Additionally, he holds research responsibilities for other commodity-related investments.
He joined Tocqueville in 2008 and focuses on generating ideas and monitoring investments related to precious metals.
Prior to joining Tocqueville, Mr. McIntyre was an analyst and then associate focused on mergers and acquisitions in the metals and mining sector with Macquarie Bank.
Douglas B. Groh is a Portfolio Manager at Tocqueville Asset Management L.P. He joined Tocqueville in 2003, where he is a Co-Portfolio Manager of the Tocqueville Gold Fund.
Prior to joining Tocqueville, Mr. Groh was Director of Investment Research at Grove Capital from 2001 to 2003 and from 1990 to 2001 held investment research and banking positions at J.P. Morgan, Merrill Lynch and ING Bank.
Mr. Groh began his career as a mining and precious metals analyst in 1985 at U.S. Global Investors.
In this 4,312 word interview, these two veteran gold investors explore where the top value is currently to be found in this interesting investment sector. Their analysis of several specific stocks is buttressed by an experienced valuation methodology:
“In the gold sector, numerous small companies are engaged just in exploration and resource discovery as their primary focus.
Their value proposition is identifying and discovering new gold deposits and then advancing the development of those deposits to a point where the economics of the resource justifies further advancement toward a construction and production decision.
The value-creating proposition for those companies is the discovery of new metal resources.
Then, there’s the segment of the sector where companies are focused primarily on developing those discoveries that might have been made by other companies.
As those properties/projects are advanced and de-risked, the market tends to assign a higher value to those assets as milestones are reached.
And then finally, there are those companies that are operators and that produce precious metals and generate cash flow on a regular basis.
The reason I break out the precious metals mining sector into segments is because it’s very important for investors to recognize that those different segments of the market require a different analytical approach.
The explorers, the discovers, they’re identifying the economic value and geologic potential of the properties they are exploring/developing. So the analysis is really more of a geologic analysis and assessing the potential of the geology and related property.
That compares to the developers who are building mines. For them, the analysis is assessing the project’s economics in terms of its risks/returns and what the project’s sensitivities are, as well as looking at the project’s progress and the risks in terms of building that project.
For the larger companies, the operators and the producers, the analysis is more of a traditional security analysis and investment analysis approach, where there’s ongoing cash flow, there’s an established balance sheet, there’s an ongoing operation.
One uses the typical security analysis that is used to look at any other company: What’s their cash flow like, and what is the quality of that cash flow? What’s their balance sheet like? What’s their future look like in terms of the proposition that they’re presenting to investors?”
One example of a stock the pair of investors discuss is located in Nevada:
“We got involved in Corvus when it was spun out of another company at about C$0.80 per share, and there were fewer shares outstanding at the time, giving it a market cap at the time of about C$35 million.
The market cap has gone from roughly, say, C$35 million to C$235 million, so almost a sevenfold increase, while shares outstanding have increased only about 2.7 times as they financed their activities.”
Get the complete detail by reading the entire 4,312 word interview with these two veteran gold investment professionals, only in the Wall Street Transcript.
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