-- Posted Sunday, 22 May 2011 | | Disqus
Blinded by the glare of gold's rocketing rise over the last several years, investors may want to follow the leads of the major miners targeting the copper space, according to Kevin Puil, portfolio manager at Malcolm H. Gissen & Associates and senior analyst for its Encompass Fund. In this exclusive Gold Report interview, Kevin tells us that major gold miners increasingly want to diversify and are turning to the red metal on the opposite end of the economic spectrum.
TGR: Do you see more of the seniors that are heavily weighted toward gold adding more base metals to their portfolios?
KP: I definitely see more M&A in the copper sector, and I also can see more gold companies actively looking for projects that will give them exposure to both gold and copper.
TGR: Will that confuse investors who traditionally have a different reason for investing in copper than they do in gold?
KP: A lot of the senior gold producers have exposure to copper, whether investors know it or not. It's arguably more profitable than mining gold.
TGR: What are your feelings about copper? And where does Encompass Fund stand?
KP: I'm definitely bullish on copper over the medium and long term. The new world reality is increased consumption of raw materials by emerging classes in big countries with accelerated development. Demand is back on track, while supply isn't. It's taking longer to repair the damage to the supply side than to the demand side.
A few factors play into this. Companies are mining lower ore grades because new quality projects are scarce. In addition, political instability, as well as mining service and equipment supply problems are becoming major challenges for copper miners.
TGR: As you pointed out, with spot copper prices hovering around $4/lb., copper mining is still profitable for most of the seniors, and several seniors already have fairly significant copper credits or copper assets. Against that backdrop, will we see more juniors entering this space? And where would you expect to see more copper mining?
KP: Definitely. I do see more juniors getting involved in copper exploration and I think the majority of these projects will be found in Latin America, Canada and Australia. We're seeing more activity—not just in the copper, but the gold/copper combination projects. We've already seen a number of acquisitions during the last year.
TGR: With so much emphasis on gold as it continues climbing to new heights, it might be easy for investors to overlook copper, but you've made it clear that the copper space is heating up and there are some exciting stories to tell.
KP: As I said early on, I'm bullish on copper and so are a lot of senior miners. They're looking to diversify, and for gold miners, copper is an easy way to do it. As companies have to look toward increasingly more difficult geography and geologies to meet demand, it's going to take more time and a lot more money to bring new copper supply online. We can probably expect more senior miners to get involved with copper as the supply/demand structure holds up for different reasons than the supply/demand structure for gold.
TGR: Thank you Kevin, you've given us a lot to think about.
A Chartered Financial Analyst (CFA) with more than 15 years' experience in the investment management business, Kevin Puil currently serves as portfolio manager at Malcolm H. Gissen & Associates Inc. in San Francisco, and as senior analyst for its Encompass Fund. The Encompass Fund, which focuses on global resource companies exploring for and producing gold and silver, copper, uranium and rare earth elements, racked up a healthy 60% return in 2010, following a spectacular 139% in 2009. Before relocating to California, Kevin worked in Canada, where he also studied economics at the University of Victoria and the University of British Columbia.
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-- Posted Sunday, 22 May 2011 | Digg This Article
| Source: GoldSeek.com
