LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
M&A Opportunities Abound



-- Posted Friday, 16 December 2011 | | Disqus

Junior explorers may be underperforming the gold price this year, but Macquarie Capital Markets Equity Analyst Michael Gray is finding opportunities for mergers and acquisitions within the precious metals space. In this exclusive interview with The Gold Report, Gray and Research Associate Shawn Campbell talk about the technical aspects that are making a number of juniors attractive targets.

The Gold Report: Michael, the companies you cover read like a who's who of junior precious metals explorers. But with the junior explorers vastly underperforming the gold price this year, how are you pitching these equities to your institutional clients?

Michael Gray: Other than the strong mergers and acquisitions (M&A) thesis for the majority of our coverage list, we've also highlighted to clients what we would call game-changing exploration upside that a number of our stocks are exposed to.

We also believe there's a strong investor appetite for high-grade, high-margin situations with relatively near-term production associated with low capital costs and short permitting timelines.

Finally, there is significant optionality associated with a number of our stocks that have large gold resources in this gold price environment.

TGR: Your target prices for precious metals explorers are predicated on prevailing forward-curve prices. That is a less than an ideal method given that it doesn't take into account tightness or weakness in the market, interest rates or inflation-adjusted values. What are your thoughts on that?

MG: It is difficult to accurately predict gold price over the next year, let alone the next five years. We use the forward curve for precious metals adjusted about every quarter on an as-needed basis for our valuations. For the past seven years, we have found it to be a very good predictor of realized future spot prices for gold.

TGR: You recently revised your long-term gold metal price assumptions for five years. In 2017, you're projecting a gold price of $1,837/ounce (oz) up from $1,714/oz, while your long-term price for silver is $33.42/oz up from $28.97/oz. Do you believe your price projections are aggressive in comparison with other brokerage houses?

MG: Our valuation philosophy is to use a flat 5% discount rate and the prevailing forward curve for long-term prices for gold, silver and foreign exchange. We then apply an operating multiple to the net asset value (NAV) that is less than one times NAV, whereas some banks may use a lower price deck and a different discount rate, but a multiple to NAV that is greater than one times. In the end, the entire valuation picture needs to be looked at to assess aggressiveness. We believe we're middle of the road.

TGR: What's your typical multiple to NAV?

MG: Among our explorers, we have a range of 0.35 to 0.85x NAV. Our high-end NAV multiples are associated with companies with high-quality assets that we see as potential takeover candidates like Extorre.

TGR: Is there a first-mover advantage in terms of a major coming in early and locking up this belt once it has proven there are significant amounts of gold there?

MG: Some of the senior mining companies have been spending up to $50 million (M)/year on their greenfield worldwide budgets, looking for another Carlin trend or similar tier-one asset. It doesn't take too many years of spending that amount of money to justify moving early on an asset like this at the right price.

TGR: Do you have any parting thoughts on investing in the precious metals explorer space or words of wisdom?

MG: I like the expression Good people do good things with a good capital structure as it certainly applies to the precious metal exploration business where projects come and go. My main comment is that to be successful at picking the winners among the precious metal explorers, especially the early-stage ones, it's really important to reduce geological risk by looking at the right geology and focusing on high-quality assets. More often than not, they tend to be associated with technically superior management teams that are extremely persistent.

TGR: Thanks for your time.

Michael Gray is a mining equity analyst with Macquarie Capital Markets and covers a range of precious metal explorers and producers with an emphasis on North and South America. He is an exploration geologist and holds a Bachelor of Science in geology from the University of British Columbia and a Master of Science in economic geology from Laurentian University. His career of over 25 years in the mineral exploration business started with senior mining companies including Falconbridge, Lac Minerals, Cominco and Minnova where he worked throughout Canada and the USA. He co-founded Rubicon Minerals in 1996 and helped navigate the company through a series of joint ventures and an asset portfolio build that was eventually centered on the Red Lake gold district, Canada. During this period, Gray was president of the 5,000 member B.C. & Yukon Chamber of Mines for one year and on the executive committee for six years. Gray then joined the mining analyst world in 2005 where he brought to bear his technical skills to identify new precious metal opportunities at an early stage with outstanding exploration potential; he has covered a number of these opportunities that were subsequently taken over by gold producers.

Shawn Campbell is a mining equity associate with Macquarie Capital Markets and supports the analyst covering a range of precious metal explorers and producers with an emphasis on North and South America. Prior to being an associate, Campbell was an auditor with Deloitte for six years where he held key roles in auditing large public mining companies. He has a Bachelor of Commerce degree from the University of Victoria and is a CFA charterholder.


 Streetwise - The Gold Report is Copyright © 2011 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.

The Gold Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report.

From time to time, Streetwise Reports LLC and its  directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.

Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.

Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.

Participating companies provide the logos used in The Gold Report. These logos are trademarks and are the property of the individual companies.


-- Posted Friday, 16 December 2011 | Digg This Article | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.