Oceanagold Corp (OGC.TO)

A mid-cap gold company. They are having trouble with their Didipio mine. The Philippine government has put a kind of moratorium on production as they review the environmental impact. This makes it a tough place to invest. If they lose their license, it represents 30%-40%. The political risk would scare him away.

Based in Australasia and were picking up a lot of assets. For some investors, this might be overexposed to the Philippines right now. They have the Hale deposit in South Carolina they are building on, and are now taking more of a focus in the Americas. They’ve been quite active in regards to placements. He sees this being quite active in the junior mining sector.

Golds have gone into a corrective phase. They have been working very hard to reduce costs and with success. It’s okay, but he thinks it will not work out over the next few months with a rising US dollar and rising rates.

He is a lot more positive on gold then what he has been in a while. Gold stocks have come way back. The US$ may run into some headwinds, inflation is coming back, and real (?) higher interest rates are coming down, which all argues positively for gold. He is spending more time on domestic producers. (See Top Picks.)

It is one of the better gold stocks in terms of valuation and they are not over levered. It has a 1.4 times book and they have historically cash flowed. They even pay a low yield. The whole sector he is quite concerned about. Gold is not a sector you want to be in.

He would not invest in this until their dispute with the Philippine government is over. Their mine has been subject to some sort of environmental audit.

Kind of on the periphery for him. He kept looking and wondering when he wants to buy it. Producing in the Philippines. They are looking to grow through the next mine. Thinks it represents reasonable value for what it has. Pays a dividend which is always nice. Going into this development project probably keeps it off of his fund holdings. He would prefer Kirkland Lake (KGI-T).

A producer of copper and gold, predominantly coming out of the Pacific rim. Have a portfolio of gold assets in New Zealand, but they don’t generate a whole lot of free cash flow. The majority of their free cash flow comes out of Didipio. The yield, from a free cash flow standpoint, looks quite strong at 6%-7%. However, there is a caveat that there is a tax holiday in the Philippines that rolls off in 3-4 years, and then the government takes half of that cash flow. The company probably needed to do something from an M&A standpoint to mitigate that drop, and they bought the Waihi asset from Newmont, a small asset in New Zealand. It has 3 years of mine life left. This is going to be a key catalyst to watch for. These factors keep him out of this story. This looks fully valued to him.

He did well last cycle and is looking at it again now. They are able to operate as a small company in several countries and do well.

Likes their free cash flow. Doesn't like the copper coming from it. He is bearish on copper. Oceanagold has two mines in New Zealand that are nearing their end so that is a concern. The company is strong. He doesn't own.

Play into later half of summer. Gold is not performing well at all now. He is targeting $1200 for Gold. Support at $1.8 for OGC.

Cautious on gold but this is one of the better companies. There is negative momentum for the coal space. Buy this and short a basket of junior gold names.