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ocqueville

ocqueville. TOCQUEVILLE ASSET MANAGEMENT, LP. Observations Made In Search of the Elusive “Ten-Bagger” Junior Gold Mining Company Stock New York SME; December 8, 2009. Doug Groh 40 West 57 th Street New York, NY 10019 (212) 698 – 0757 dgroh@tocqueville.com. December 2009. NOTICE

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ocqueville

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  1. ocqueville TOCQUEVILLE ASSET MANAGEMENT, LP Observations Made In Search of the Elusive “Ten-Bagger” Junior Gold Mining Company Stock New York SME; December 8, 2009 Doug Groh 40 West 57th Street New York, NY 10019 (212) 698 – 0757 dgroh@tocqueville.com December 2009

  2. NOTICE THIS PRESENTATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OR OTHER INVESTMENTS. SUCH OFFERS MAY ONLY BE MADE AT THE TIME A QUALIFIED OFFEREE RECEIVES DEFINITIVE DOCUMENTATION THAT SETS FORTH INFORMATION (INCLUDING INVESTMENT OBJECTIVE, POLICIES, RISK FACTORS, FEES, TAX IMPLICATIONS AND RELEVANT QUALIFICATIONS) CONCERNING THE RELEVANT SECURITIES OR OTHER INVESTMENT. IN ADDITION, SUCH OFFERS WIL ONLY BE MADE IN THOSE JURISDICTIONS WHERE PERMITTED BY LAW. TOCQUEVILLE ASSET MANAGEMENT, LP (“TAM”) WILL NOT OFFER, SOLICIT OFFERS TO BUY, OR SELL ANY SECURITIES OR OTHER INVESTMENT IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNTIL THE REQUIREMENTS OF THE LAWS OF SUCH JURISDICTION HAVE BEEN SATISFIED. THE INFORMATION CONTAINED IN THIS PRESENTATION IS PROVIDED FOR GENERAL INFORMATION PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS FINANCIAL, TAX OR OTHER ADVICE OR A RECOMMENDATION TO PURCHASE SECURITIES OR ANY OTHER INVESTMENTS. NO REPRESENTATIONS OR WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC, REGULATORY, TAX OR OTHER CONSEQUENCES THAT MAY RESULT FROM PARTICIPATION IN ANY INVESTMENTS. FURTHER, IT SHOULD NOT BE ASSUMED THAT ANY SECURITIES OR OTHER INVESTMENTS IDENTIFIED IN THIS PRESENTATION HAVE BEEN OR WILL BE PROFITABLE. YOU SHOULD VERIFY ALL CLAIMS AND CONDUCT YOUR OWN DUE DILIGENCE PRIOR TO INVESTING IN ANY SECURITIES OR OTHER INVESTMENTS. IN CONSIDERING THE INFORMATION CONTAINED HEREIN, INCLUDING WITHOUT LIMITATION, ANY PROJECTIONS REGARDING POSSIBLE ECONOMIC OR RELATED DEVELOPMENTS, PERSONS REVIEWING THIS PRESENTATION MUST BEAR IN MIND THAT CERTAIN SUCH INFORMATION CONSTITUTES “FORWARD-LOOKING STATEMENTS,” WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “MAY,” “WILL,” “SHOULD,” “EXPECT,” “ANTICIPATE,” “PROJECT,” “ESTIMATE,” “INTEND,” “CONTINUE” OR “BELIEVE” OR THE NEGATIVES THEREOF OR OTHER VARIATIONS THEREON OR OTHER COMPARABLE TERMINOLOGY. DUE TO VARIOUS RISKS AND UNCERTAINTIES, ACTUAL EVENTS OR RESULTS OR THE PERFORMANCE OF ANY INVESTMENT MAY DIFFER MATERIALLY FROM THOSE REFLECTED OR CONTEMPLATED IN SUCH FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS IN THIS MEMORANDUM ARE BASED UPON VARIOUS ASSUMPTIONS MADE BASED UPON, AMONG OTHER THINGS, TAM’S EXAMINATION OF HISTORICAL TRENDS, DATA CONTAINED IN ITS RECORDS AND OTHER DATA AVAILABLE FROM THIRD PARTIES. TAM BELIEVES THESE ASSUMPTIONS WERE REASONABLE WHEN MADE. HOWEVER, BECAUSE THESE ASSUMPTIONS ARE INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT AND ARE BEYOND ITS CONTROL, TAM CANNOT ASSURE YOU THAT ANY FORWARD-LOOKING STATEMENTS HEREIN WILL PROVE CORRECT. CERTAIN FACTUAL INFORMATION CONTAINED HEREIN MAY HAVE BEEN OBTAINED FROM PUBLISHED SOURCES PREPARED BY OTHER PARTIES AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY TAM OR ANY AFFILIATE. ALL OPINIONS EXPRESSED IN THIS PRESENTATION ARE THE SOLE OPINION OF TAM AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. STATEMENTS IN THIS PRESENTATION ARE MADE AS OF DECEMBER 2009 UNLESS OTHERWISE STATED HEREIN, AND THE DELIVERY OF THE PRESENTATION AT ANY TIME SHALL NOT UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO SUCH DATE. NEITHER TAM, NOR ITS AFFILIATES, GUARANTEES THE ACCURACY OR COMPLETENESS OF THE INFORMATION IN THIS PRESENTATION. ACCORDINGLY, NEITHER TAM NOR ANY OF ITS AFFILIATES, OR ANY OF ITS EMPLOYEES SHALL BE LIABLE TO YOU OR ANYONE ELSE FOR ANY LOSS OR DAMAGES FROM USE OF THE INFORMATION CONTAINED IN THIS PRESENTATION. SK 52276 0001 1058685

  3. Tocqueville is a healthy and durable franchise based in New York, with an affiliated advisor in Paris, France. Employee-owned limited partnership, founded in 1985 to manage private accounts for wealthy families, with an absolute return investment philosophy. Separately managed accounts, mutual funds and hedge funds based on a contrarian / value-oriented investment style with a bottom-up stock selection approach using proprietary, fundamental research. Currently more than US$7.7 billion in client assets under management of which $1.5 billion is in gold and gold equities. Strong long-term investment results. Tocqueville Asset Management

  4. A GOLDEN ARGUMENT

  5. U.S. Dollar - On Credit Watch? 1) Negative Trade Balance 2) Weak Economy 3) Rising Inflation / Deflation Concerns 4) Negative Real Interest Rates 5) Fiscal Disorder - Socialization of Credit

  6. Fed’s Balance Sheet: 1930’s vs. Today 12/02/09 $2,187 17.5% 1930’s 146% The Fed’s balance sheet expanded by $1.2 trillion over the last fourteen months. 9/10/08 $888 Source: Bloomberg; Bianco Research; Friedman, Milton, & Schwartz, Anna Jacobson (2008). The Great Contraction, 1929-1933, 65.

  7. Credit Spreads are a Proxy for Risk Perception (Gold Correlates Positively) Quality Spread & Gold Moody's Seasoned Corp Aaa vs Corp Baa Jan 1978 - Nov 27, 2009 Source:Fred Kalkstein

  8. Gold – A Hybrid Commodity Capital Market View: A Store of Value Lost & Unaccounted Conclusion: Capital market flows exert more influence on the gold price than traditional supply and demand flows. Other Fabrication Private Investment Official Holdings Commodity View: Supply = Demand Jewellery Jewellery Mine production/producer hedging Industrial & dental Official sector sales Bar & coin retail investment Other retail investment Old gold scrap ETFs & similar Data: as of YE 2008 Source: World Gold Council, GFMS Ltd.

  9. Capital Market Cycles The Dow/Gold Ratio (DJIA divided by Gold Price) 1915 - 2008 Conclusion: 1) Gold does best during credit contractions. 2) Cycles are multi-year. 3) Cycles end when 1 ounce of gold equals the DJIA. Source: Tocqueville Asset Management, LP

  10. THE ATTRACTION OF JUNIOR GOLD MINING STOCKS

  11. 1) They are claims on un-mined gold. 2) Offer dynamic exposure to potential upside in gold bullion. 3) Possible value enhancement through discoveries and reserve growth. Rationale for Gold Mining Shares

  12. Life Cycle of a Gold Mining Stock INVESTMENT SWEET SPOTS Source: Tocqueville Asset Management, LP

  13. Investment Appeal of Early Stage Gold Companies Valuation of Equities at Different Stages of Evolution ~ ~ ~ ~ ~ Source: RBC Capital Markets, Tocqueville Asset Management, LP

  14. Gold Stocks Represent Historic Values XAU (PHLX Gold/Silver Sector Index) as a Ratio of Spot Gold ($/oz) (Dec. 19, 1983 – Dec. 4, 2009) Same as 1929? Source: Bloomberg

  15. The Strategy, The Assets, The Value Creation….. The Opportunity Management & Strategy: Experience and how they’ll create value, now! Minerals & Mines: Whatever’s hot or revisiting last cycle’s assets Money – Capital Needs and Potential: Money Here / Money There – “Show Me the Money”!

  16. Drill for Fun or Fund to Drill Adding Value with Good Intentions but Then What? “It’s got to be worth something, and so, somebody will …..Give Us Some Money” ….Take Care of Our Problems” …….Take Us Out of Our Misery” Junior Gold Mining Company Strategies

  17. Capital Needs / Potential Share Dilution Measuring Consistency (in the Results and the Strategy) Metrics: Market Value per ounce Net Asset Value per share Cash Flow per share Internal Rate of Return / Return on Capital Determining What’s it Worth: A Matrix of Meaningful Metrics

  18. International Tower Hill Management: “Been There” and Livengood Colombia Gold Fields / Medoro Resources Minerals / Mines: “More Where That’s From” Osisko Money: “Cash Flow or M&A; Leverage Either Way” Ten-Baggers That Have Done It and How

  19. Conclusion: Gold benefits from negative real interest rates. * Real Rate = 90-Day T-Bill Minus LTM CPI * Real interest rates plotted inversely (left hand scale) Source: Fred Kalkstein

  20. A GOLDEN FUTURE

  21. *Market Cap. of Above Ground Gold/ U.S. Financial Assets Source: Tocqueville Asset Management, LP

  22. Potential Impact of a 1.1% Increase in Investment Allocation to Gold Incremental gold required is 33,000 tonnes of gold, more than exists in the known float. Assumptions: • No price impact • Based on the 12-month average gold price to 30 September 2009 of $897/oz. • Estimated global financial assets of $87.6 trillion as of 2007. Source: World Gold Council

  23. Exploration expenditures are rising but discoveries are not keeping up with production

  24. Exploration has seen technological advances and greater expenditures … but exploration risks remain high with less success … this means value creation in the ground is becoming more expensive

  25. Gold mine development is declining too Mine development is taking longer, is more capital intensive and there are fewer large projects Generally, the attractive mine projects are located in remote and politically difficult areas Resource ore grades are lower, which means they are more expensive to mine

  26. Juniors tend to find the gold projects of tomorrow

  27. VSE, CDNX and TSX Venture Exchange (January 1983 to November 2009)

  28. Gold in Transition: Valued in Transactions -- An Evolving Role “The central element in the economic problem of money is the objective exchange-value of money, popularly called its purchasing power. This is the necessary starting-point of all discussion; for it is only in connection with its objective exchange-value that those peculiar properties of money that have differentiated it from commodities are conspicuous.” Ludwig Von Mises: The Theory of Money and Credit

  29. Golden Views or Fools for Gold “The desire of gold is not for gold. It is for the means of freedom and benefit” Ralph Waldo Emerson “The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."Alexis de Tocqueville

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