Detour Gold (DGC.TO)

Had a bit of the stumble about a year ago, which caused a delay in one of their mines. They seem to be getting past that now and things seem to be getting back on track. It could be a potential investment, but he wouldn’t put all his eggs in one basket.

The price of gold has held pretty well, but equities have given you another selloff. This one has had its own particular problems in the mining side as well as on the debt side. It should be one of Canada's greatest, because 500,000-600,000 ounces given a prospective producer, which we haven’t seen since Campbell Red Lake.

This consists of one large mine at Detour Lake in Northern Ontario. Very, very large and very low grade. If you were incredibly bullish on gold, it would be an interesting name to own as you would get a lot of torque, and the high cost producers’ margin expansion is a lot greater as gold prices move higher. There are probably better names to own. Not only do you have the high cost issue, but you also have the single mine risk.

This is positive, in the sense that it is below his model price. Most gold stocks are substantially above. Closed at $17.40, and he has a model price of $23.08, a 32% upside. He would be tempted to buy this at $14.66.

Sell the ETF XGD and buy Detour Gold (DGC-T) instead? He likes Detour Gold, but if he were looking to add gold stocks at this time, he would be looking at Agnico Eagle (AEM-T), Kinross (K-T) or Yamana (YRI-T), because they are a bit cheaper. There are also probably some microcaps you could have a look at. Detour has had a great track record, so you probably would be okay owning it.

Gold has done pretty well lately with its resurgence. As a sector, it is reasonably attractive now and for the next few weeks at least, if not for 6-7 weeks or more. This company is still developing the Detour mines, so you are looking at 3 or 4 years of substandard cash flows. Doesn’t see any reason why you need to be here.

Apart from the gold price, they have postponed mining of a new ore body. Everyone is questioning where production growth is going to come from. If it gets cheap enough it could be a potential takeover.

They own the largest gold deposit in Canada with about 15 million ounces and a 20-year mine life. He thinks this is a subject of a buyout, and if you are patient, you could profit from that.

This is seen as a higher cost gold producer. Chart shows it has dropped from almost $36, and is in danger of testing a big band of congestion area at around $10. If $10 is too much of a pain, then sell your holdings here, or at least sell half.

Has a huge mine in Ontario and is perennially seen as being a takeover candidate. They wanted to permit the West Detour zone, but the permitting process is going slower than expected. There are some loans coming due this year, so they will have to do some financing. Once they get through that, this is a decent producer. One thing to keep an eye on is the new Life of Mine plan (LOM). Overall, this is a cheap stock. As a takeover candidate, it would be a sizable acquisition of possibly $3 billion.

He likes the story for what they accomplished. They rethought skinny veins as an open pit project.

(A Top Pick Nov 11/16. Down 0.77%.) (BNN showed June 27/16! – Bill.) This was quite topical in that it was the day after the election and their Corona brand comes out of Mexico. The company has gone sideways after having a good year. People still don’t know what the actual border adjustment tax is going to be. In the meantime, the company is sitting on a stable of great brands. A well-run company. Still a Buy.

One of the more promising junior/intermediate gold producers. Recently had a sort of mixed quarter and announced a bit of a setback with the development of one of their projects and whether or not they would get the permitting to develop it within the timeframe they had set. He thinks that is just a temporary phenomenon. This looks like it really has a good future.

Expects that gold and this company will see a recovery for a little while. There is some uncertainty about the market direction right now. In his view, the road ahead is higher, but bumpy. Gold has a small place in your portfolio as a bit of a hedge.

Gold has 2 periods of seasonal strength. We have just entered one during the last couple of weeks. Historically it does very well from around the 2^nd week in December right through until approximately the 1^st week in March. Currently it is forming a nice little base and is starting to pick up. Looks like a good trade for the next couple of months.