Alice Tsang

Resources. Feels there is a sense of calm in this space so she is sensing that we have hit the bottom in industrial metals in June/July. US has been performing very well and China and Europe also have been turning around. With this, she thinks demand is going to stay quite healthy, although you are going to have lots of supply coming on within copper and nickel space. We are at a point where we have lower volatility in this space and can start picking away at good stocks. Stocks are now so cheap that the pendulum has swung too far the other way.

Copper. In the short term, this year and next, there are supplies coming on. Copper has been depleting for a long time and it will be difficult for additional supplies to come on strongly. With stronger demand, we might be running into a deficit situation again, 3-5 years out. Currently trading at $3.20 and if we assume that we have a low copper price of $2.70-$3, a lot of companies are not going to be making money. However, when copper prices start to peek at about $3, copper levered companies can start generating cash flow. When we start seeing healthier copper prices, looking back it will seem current copper prices are very cheap.

Oil/Natural gas. Although China is slowing, you are still looking at a very strong power and energy demand. Longer-term, she feels oil has a chance to break out to $105 levels. That might put somewhat of a damper on economic fronts and she thinks we may have a longer way before getting to that point, maybe 2 years or so.

Likes this name quite well. Over the last 2-3 quarters, they have disappointed in terms of guidance. Very large land base and have only started putting pieces together. Over the longer-term, if execution turns out well, the stock will be rewarded with higher valuations. She is on the sideline and just watching their execution to see if management can deliver. (Host comment: Street consensus is that the stock will be $1.63 in the next 12 months.)

Very well loved name and rightly so because they have one of the lowest costs in the sector. Still making money at current prices. However, this stock has always been expensive. If the view is positive on natural gas, then it will probably move up. However, AECO is currently trading at a huge discount compared to NYMEX and so in the upcoming quarter there may be a little bit of risk and disappointment on the cash flow front. Alternatively, Encana (ECA-T) would be an interesting gas play as they are looking at strategic alternatives to turn the company around. Trading roughly at about 4X cash flow and debt is reasonable at about 2X. There is talk about them eliminating their dividend and if that happens, this would be a case of Buy on Weakness.

Operates in Nigeria, so there is obviously country risk. It is always cheap. Although she hasn’t looked at valuations for a while, it depends on the declines of the wells but these wells come on significantly strong.

Likes this. Valuation is very cheap. Company amalgamated a few different businesses and one of the most interesting one is trucks that heat pipes that go into the ground to prevent them from bending, which saves piping companies a lot of money. Demand for this is huge. Trading at very cheap valuations. If you are buying, stage your purchases with the hope that the stock comes down to $0.60. She could see this stock getting to $2. (Host comment: 2 analysts only, one showing $2 and the other $0.85.)

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.

Gold. Expects it to go lower before going higher. Faces a few challenges, including a rising rate environment and Fed tapering. Consumer consumption as well as investment in the 2^nd quarter of this year dropped about 12% as compared to 3% last year. Investment demand actually dropped 50% with consumer demand increasing about 60%. In the next few quarters, if you have less consumers coming into the market, she feels there will be a larger shortfall on the demand side. Because of this, she is very cautious on gold. We still don’t know where central banks interests are in terms of buying gold. She is very cautious on gold.

At $1400-$1500 gold, they still have to develop their underground mine, which has been challenging. At current gold levels, investors are probably dumping the stock because prospects could get more difficult. You need gold prices to make a dramatic turn and she doesn’t expect this for the next 2 years anyway.

With the uncertainty of the gold space, she would tend to gravitate towards higher-quality names such as Franco-Nevada (FNV-T). The last couple of deals they have done have caused some investors to step back.

Based on her outlook of gold, she would be cautious and would look for companies with lower valuations. Although this one has come down significantly, it is still trading at higher valuations than some of the gold producers. Based on her outlook of gold, she would be cautious and would look for companies with lower valuations. Although this one has come down significantly, it is still trading at higher valuations than some of the gold producers.

In the next 12 months or so, she thinks this might rebound from the current lower level. Valuations are quite cheap. Company has a very attractive balance sheet. However, about 30% of their major drilling business is coming from exploration on the Junior side. Stock has priced in somewhat with lower activities. 2.75% dividend and she doesn’t see any increases coming. (Host comment: Beta is 1.9 id est., 90% more volatile than the TSX.)

Feels they are starting to turn around. In Albania and management went in with lots of expectations to recover an old oil field and subsequently found that some of the pipes and wells have a lot of erosion. They pretty well spent the last 2 years in repairing wells and are finally seeing a very good response. Stock is very cheap. Sitting on 6 to 8 billion barrels of oil, so she feels there is a lot of value in the stock.

(A Top Pick August 31/12. Down 41.80%.) This was a regretful choice because they had an SEC investigation, which she didn’t like, so she sold her holdings. In addition, rare earth prices are coming down dramatically. Also, have a very high debt level.