We tap our extensive list of experts inMoney Talks,*’s regular drill down into the sectors and companies that investors have their eye on right now.
Today, we hear from John So, co-founder and portfolio manager at VP Capital.
VP Capital has always been positive on gold investment, partially as a hedge to offset any ‘mishaps’ in the market. Likecoronavirusorthe Iranian incidentfor example.
“Gold is a nice hedge in any portfolio,” So says.
“But we also believe the gold price is going to continue to sustain, if not appreciate, over time as interest rates fall.”
Gold equities are going to be well positioned, So says, especially Aussie gold miners which also benefit from the [AU-US] dollar exchange rate.
So admits it’s become harder to find great value gold stocks in the last three months.
“Partly because while the gold price has run, a lot of these producers have run a little bit ahead of the incremental margins they would get from their operations,” he says.
“But there are a few on our radar.”
Market Cap: ~$430m
Red 5 is a ~120,000oz per year WA producer looking to ramp up its second gold project.
“It has a strong resource base — which has been upgraded progressively a few times over the past 24 months — and an existing operation which provides cash flow,” So says.
“That makes Red 5 not too expensive at about $400m market cap, compared to where they could be if they get their second mine up and running.”
Market Cap: ~$1.5bn
“We were in Gold Road as it started ramping up [to full production],” So says.
“It has become a little bit more expensive than I like, [only because] we have seen a lot of gold producers face issues as they ramp up.
This period can be a danger time for investors, So says.
“I think that’s why Gold Road was trading at bit of a discount [six months ago]. Investors wanted to see if the company could deliver what it promised.
“So far with a very good management team it has managed to do so — which, by the way, doesn’t always happen.”
The market saw that with companies likeBlackham Resources (ASX:BLK), So says.
“Blackham had a very strong share price trajectory but getting operations [to run smoothly] proved more elusive than management expected.”
READ:How this small cap explorer became a +$1.2 billion success story
Market Cap: ~$13m
VP isn’t investing in many explorers at the moment, but there is one So is taking a close look at — Resolution Minerals.
“RML owns a large swathe of tenements next toNorthern Star’s (ASX:NST)10-million-ounce Pogo mine in Alaska,” he says.
“It’s a ~$13m market cap explorer with significant holdings around a very successful operation. I think there will be some excitement going forward with it.
“They are a very early stage explorer, so will continue to need capital because that is the nature of the exploration game. [But] it will probably rerate before another funding activity comes along.”
READ:Resolution – on the hunt for Alaska’s next big gold discovery
John So has 8 years’ experience in investment banking, corporate finance, equity capital markets and project finance, where he has worked on over $8bn of transactions, mostly for corporate clients. During this time, John also spent six years as a natural resources corporate finance specialist. In February 2018, John co-founded VP Capital and has been managing wholesale funds since.
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of *. * does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
