Augusta Gold (G.TO)

If you are looking for exposure in the gold space, you have no better alternative than this one. He believes the US$ will continue to strengthen, and in that environment gold is going to be more challenged. This company has the lowest costs in terms of bringing gold out of the ground. The lack of geopolitical risks is attractive.

Gold has a specific seasonality, from July into September, and sometimes into October. Chart shows a downward trend channel that is taking place. We are seeing some positive action in gold itself, but the overall pattern is not good. He would be looking at June to focus on this.

The problem is that the valuation is the highest in the group. They had some problems in Mexico with missing production estimates. Gold prices checked back and so you saw a pullback in G-T. Hold it, but don’t add to it. He prefers mid-sized companies that might get taken out.

One of the lower cost producers which will progressively get lower. Just did an acquisition of Probe mine, which leverages off existing infrastructure, so that they don’t have to build a mill. Have 2 mines ramping up that are meaningful and should take the company from about 2.8 million ounces to about 3.4 million ounces by 2016. Likes the cost structure of the company, and thinks it becomes even a little more efficient. Waiting for a better entry point. Any potential problem with ramp ups could provide a better entry point. This is one that he would own for the long-term.

Stock vs. Stock. G-T vs. ABX-T. G-T is better run than ABX. ABX-T will have more leverage if you see an immediate increase in gold price, however.

Energy is a minor input for this company, so that helps. If there is one name that you want to own in the gold space, it is this one. It has the best growth, best balance sheet and it is cost competitive. He is of the view that the US is going to recover, and if it recovers and the US$ is strong, then you don’t necessarily need to be in a gold company.

He has no exposure to gold stocks. Gold has always been viewed as an alternate currency, so as long as the US$ is strong he doesn’t believe gold will do well. He expects it to be range bound between $1000 and $1200. This is probably the best run, large cap, Canadian gold company.

(Top Pick Feb 4/14, Up 11.47%) You want insurance before you need it. It went up 43% in January. Good balance sheet and they have taken their write-down. It is a valid sector to own.

When the whole quantitative easing in the US started, the argument he heard was that they were going to foster hyper inflation, i.e., money supplies were being blown up and Central Banks globally were blowing up their balance sheets, and the only thing that was going to be worth anything was gold and silver. That turned out to not be the case. We are not seeing inflation, but on the contrary we are seeing deflation globally, which means dollars buys more, not less. He is not a believer in gold.

Gold stocks have been outperforming since September. The current pullback is because we have hit $1300, which is a very important technical point. Cost of production is coming down for this company and all the producers. This had a 50% increase in production output and a 6% decline in cost of production. Going forward, this is going to be very good for the bottom line. His company’s target is $29 US.

One of the best run gold companies in Canada. He is holding it in accounts where he does not want to trigger capital gains. He is very neutral on gold itself until we see signs of inflation. Gold has shown some signs of life partly because of people in weak currencies who want to park their money in gold. If you do want a gold holding this one is okay.

Believes the dividend is safe. Generates about $1 billion a year in cash flow from operations, and pay out about half of that. So from that perspective, there is a healthy buffer. Debt level has increased considerably over the last few years and he would keep an eye on this. You should also ask yourself if you really want to be in the gold space right now, and he doesn’t.

Gold is a very difficult commodity to handicap, because of the lack of physical demand and its speculative demand that comes with Central Banks, etc. As a producer, this company does a pretty good job. They have good mines and good low cost production. Have a pretty good dividend policy. Maintained their dividend through the last gold swoon of the last couple of years. Currently yielding between 2%-3%, so this is the one that he does own, although only 2.5% of his portfolio.

He is still very favourable to gold. At the rate governments continue to print paper, at some point we are going to have to have a change in the overall world financial system. Gold will play a part in that. Russia is buying gold and the Chinese are continuing to buy gold. At this very point, he doesn’t see a catalyst that is going to drive it up much beyond $1250-$1300. This is one of his favourites and has many of the attributes that he looks for in a gold company. They have great expansion plans and production will probably be substantially increased over the next 3-4 years. That will permit them to throw off free cash flow and look at other prospects.

One of the biggest gold producers globally. Well capitalized. Just completed a major mine expansion program. Production is ramping up quite nicely and the capital spending is now behind them. At $1200, most gold companies cannot make money today. This is a low cost producer with growth from the mines that are now coming on. Generating free cash flow. Dividend yield of 2.86%.