Detour Gold (DGC.TO)

One of the better pure play golds in North American. He is still cautious on gold. Gold has been in a general downtrend for about 3 or 4 years now, and showing signs that it might be bottoming here, but could be going to new lows again.

He likes the stock, but right now he is focusing on Goldcorp (G-T). Thinks this will do well because of increasing production.

Does not follow any more. He has never been close to buying it. He owns 4 other gold companies. He likes the gold sector but never came close to buying into this one. Most companies in the sector have poor balance sheets.

Gold companies doing well last year were operating in geographies where they benefited from declining currencies. In the last little while we saw the Canadian dollar getting back some of the ground so the trade goes the other way. The gold price itself is fighting against the idea that the Fed will raise rates. He is not near term bullish on gold, but it will do better in 3 to 5 years.

Everybody is devaluing in the International currencies. At some point, he believes that you need some gold in your portfolio to protect you. This one has a decent mine production and levered to the upside of the gold price. He doesn’t want geopolitical risks. The risk is that you have a higher breakeven on it.

A lot of people have compared this to Osisko with large open pit low-grade deposit, a lot of moving of material throughput and mill availability being crucial to the costs, as to whether you are going to be making money or not. Osisko’s Malartic went through an extended ramp up period, which wasn’t easy and is still going through major improvements. He thinks Detour Gold is going through the same process. Their balance sheet can withstand a little bit of a delay in terms of going into free cash flow mode. He is looking for another few quarters of throughput improvement. With steady progress and costs continuing to fall off, it will be a great free cash flow generator.

Really benefited from the lower Canadian dollar and lower diesel prices. Suspects it could be a takeout candidate. It is beginning to operate effectively. Suspects they are only a couple of quarters away from solving all their operational problems.

When you have this race to devalue global currencies, at some point gold has to gravitate higher. You don’t want to be without gold in this environment. The stocks are cheap relative to gold. You are also seeing the amazing political risk in the world so you are really getting a premium for the Canadian mine that this one has. He likes it here. He was buying this morning. He thinks there is a good chance it will get taken out in the future.

Gold stocks have had a couple of good days of runs. This one has operations that are making some free cash flow, and any sort of run in gold prices drops to their bottom line. Long-term he is bullish on gold prices, but in the near term he can’t see it going anywhere beyond $1250, but not below $1100 either. If you are inclined to trade, this is a good one to own.

Building a big mine with relatively high costs, but it is strategic. Ultimately could be a takeover target. As far as gold companies go, they screen very well. He is not positive on the gold companies. Gold has done surprisingly well given that we are now at a 10 year high in the US$, so he is not quite sure where the strength for gold is going to come from in the future. He can see gold at around $1000 an ounce by the end of this year.

The sad thing about the decline in the gold sector is that they eventually get bought out at prices which are amazingly low. They are building for a 400,000-600,000 ounce objective, and he thinks they are reasonably on track. He expects they will be a survivor.

A very well run company. He has a $17 target. He likes this company. It has been delivering along the way. Started production and continues to survive.

As everyone knows, gold has been sliding for the last few years. In its seasonal period, from July until the end of September, it has actually performed quite well up until this year. Last year, gold really got crushed in December and bounced up in January. The stock dropped during 2013 and has been consolidating in 2014. Not in bad shape. Gold can be positive in November. He doesn't call it a seasonal trade because it does not outperform the market, which is one of his criteria. On a technical basis, he would wait for this to consolidate a little bit more.

Traded in and out of this in the last week. The interesting thing is that this is the levered play right now. They have a high cost of production at about $1200 an ounce. With the US$ going higher, that is another downward move on gold. Because this is a higher risk play right now, he would stay on the sidelines.

This is the kind of stock that will find favour in this market. It’s a Canadian market and it’s built. You sort of have a roadmap to the future, with the takeover of Osisko. Believes it is fully valued.