Detour Gold (DGC.TO)

Small cap resources and especially gold has done well recently. It has momentum here and is approaching resistance at $12.

All the articles were very negative a month or so ago but since then has really pushed upwards. This is on his Watch List but he’s not looking at it really closely right now. (See Top Picks.)

Chart shows this has had a huge run since the beginning of the year, in a period of time when gold is really getting rolling. Has outperformed gold and the market. In an upward trend and trading above its 20 day moving average. However, there is some resistance at around $12. Normally gold stocks do well until into March.

You could easily see this gold stock into the mid-teens in a better gold environment. Expects there will be an equity raise sometime soon so he would be watching for that as another entry point. They’ll probably need to do an equity financing. They are one of the highest cost producers out there. They only have the one asset so you are playing it pretty close to the line, which is why the stock got pummelled last year.

Similar to OSK. Part of the recent run is due to OSK possibly getting taken over. Likes the free cash flow on DGC and predicts 10% plus. The balance sheet does not give them the means to do this. They probably need more capital. If you have a long time horizon it probably has a much higher valuation in the future.

Low grade open pit mine. Key is keeping the mill full. They have had their issues getting fully ramped up. G-T’s offer for OSK-T gives some indication of the value. Is adding to his holdings.

Thinks this would be a good acquisition for somebody. Right now their all-in costs are a little bit high because they had just started up the mine. Had a management change which created a really good trading opportunity. Once the mine is fully running it will be producing about 700,000 ounces a year at an average cost of about $700.

We are at the ’09 levels and now they are starting to produce. If they turn around maybe it would be interesting. Doesn’t know about the management and the replacement of the CEO.

(Market Call Minute.) Ridiculously priced.

Have started production. Feels that gold has to come down more before it goes up. Their average cash cost is about $800. If gold holds up above $1100-$1200 this is attractive.

This is a company that he has been adding. His company has it with a $20 target and as an outperform. Management has executed very well on the new mine start up.

Newest gold producer, in Ontario. Being a year behind they got to learn some of the things that OSK-T learned. Costs are just under $1000/oz. He participated in the recent equity issue. Sees good upside. They won’t get started on the right track. It may take a year. He likes OSK-T as well as it is a little further ahead.

The whole gold sector was smashed late April and has kind of rebuilt itself. This one had built a small base and then went up. If it can get above $12.25-$13, there is not a lot of resistance until we get up to about $20. This would be a reasonable entry point and $11.50 would be a good place to put a Stop.

Management team is former Barrick Gold. Concerns about whether they can raise capital through equity or debt. Feels that the price could go to $24 in the next 12 months. If you can be patient you may see a phenomenal return in 12-18 months. May see a 15% return.

To him this is a test mine to see how these things really work. Large, low grade disseminated deposit, but not well disseminated as the deposit is spiky which can cause troubles to a mining operation. Have done a lot of work to try and deal with this and he is watching to see what happens. There are big expectations and usually when you start something this big, there are hiccups.