Detour Gold (DGC.TO)

Gold can be tail risk insurance in a portfolio in the event of financial calamity, currency debasement or rampant inflation. Sometimes an effective way to put on that positioning in the portfolio is through the producers. His view is less constructive on gold as a commodity at the moment. This has a large-scale open pit mine in Northern Ontario, and a long mine life. With the US$ being very strong and the Fed likely increasing interest rates, that would colour his view on holding this name.

He has liked this company for a while. It had a really long period of building up the company with no cash flow, no cash flow, no cash flow. Then, a couple of years ago, all of a sudden it started accumulating a decent ROC. It is just starting to go cash flow positive, in general that is a great time to be an investor, because a lot of the risk has been taken out.

A big, 1 mine asset in Canada. It’s had a few production problems, which is what slowed the stock down over the past year. There are very few places where you can go and buy a mine that will produce hundreds of thousands of ounces every year in a jurisdiction like Canada. The lower Cdn$ helps as well. Thinks it will get taken over.

This came under additional pressure, because the West Detour looks like there was some delays and costs coming a little higher than initially expected. This is still going to come on, just a little later than expected. The drawdown on the stock is more than offset. The balance sheet is in good shape. Good cash flow generation. Long lifeline. This will make a great take out candidate for one of the larger players at some point. (Analysts’ price target is $28.76.)

There are better places to go for gold exposure. It is going to be in the penalty box for a while as they just lowered their 2017 guidance. He owns FNV-T, but is not that positive on the sector.

Came out with a disappointing quarter, and in that quarter they talked down “Street guidance” over the coming year. Things are being pushed farther out into the future. In growth stories like this, something like this is a set back, and the stock is going to take a bit of a pause. This is just a delay, not anything to get really concerned about.

He would not buy it at today’s price. It has poor price momentum and the valuation is not good. Debt is not a massive problem, but they keep missing.

(A Top Pick Aug 5/15. Up 165.56%.) He is surprised that this didn’t move much better, because it is a 500,000-600,000 ounce producer.

A large Canadian deposit that is doing very well. Although a very big discovery, they are still having great exploration results. Those come with grade and they will still be produced early in the mine plan. If you think gold is going higher, which he does, this is a premium name at a premium price in a premium country.

(A Top Pick June 27/16. Up 1.12%.) One of the larger to mid tier producers that is an attractive acquisition candidate for senior producers like a Barrick Gold (ABX-T) that has a gap in their production profile.

(A Top Pick June 17/15. Up 96.25%.) One of the premier assets in gold. A 550,000 ounce producer making it an intermediate in its own right. Low cash costs at about $10.50 an ounce. What is special is the 20-year mine life. Still a Buy.

You really have to look at the free cash flow growth. $150 million this year, and is going to grow to $350 million over the next few years. Has an 8% free cash flow yield, and you don’t find names with that kind of free cash flow yield very often. It has assets that are large and desirable for majors, which he thinks is what is ultimately going to happen. It also has good exploration potential. Trades at 1X NAV versus its comps at 5X NAV.

One of his great regrets was balking at buying this company. He doesn’t own it, but wishes he did. A very good asset in a very good location. It is a big enough asset to actually move the dial for the major mining companies.

A cash flow machine. As an acquisition target, it will fill holes for a lot of producers that might be short of cash flow over the next few years. They have built out their mine and most of the capital has been spent and is now in a reaping phase. It will participate with higher gold prices, but also would be a great addition to a company that needs a growth profile in order to finance a bunch of projects that they have coming on.

(Market Call Minute.) Still looking for throughput and grade to improve through the year before he commits to this name, although it has done quite well.