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Mutual Fund News

Precious metals fund seeks small wonders

swon@globeandmail.com

What are we looking for?

What the pros are buying.

The holdings of mutual funds are posted on the firm's website either monthly or quarterly. It's worth a look to get stock tips or check out a fund. Today, we examine Middlefield Precious Metals Class (middlefield.com).

More about the fund

The $18.6-million precious metals equity fund has been run by Dennis da Silva of Middlefield Capital Corp. since 2008. The fund, which gained 63.1 per cent for the year ended Sept. 30, has posted an average annual return of 46 per cent over two years.

The fund is 60 per cent in gold stocks, 10 per cent in silver securities and the rest in cash. "I am just waiting for a bit of correction to take advantage of opportunities," he said. "Despite what [the price of] gold has done, we have not seen equities necessarily keep up through October."

While Mr. da Silva doesn't rely on higher metal prices for his stocks to perform, he expects that gold could hit $1,500 (U.S.) an ounce by year-end.

There is no clear strength to a U.S. or even a global economic recovery, he said. "People are resigning themselves to very low, single-digit GDP growth. That drives [investors] to search for momentum trades as well as alternative currencies and asset classes."

What did we find?

Small to larger-cap mining stocks. They include Kinross Gold Corp. and Rubicon Minerals Corp., which are still in the red this year.

Mr. da Silva doesn't own mining giants such as Barrick Gold Corp. or Newmont Mining Corp. because their stocks typically rise and fall with the price of gold. But he will own larger firms like Goldcorp Inc. and Kinross because they can add 50-per-cent growth over the next two or three years through acquisitions and operating ability.

He inherited shares of Kinross last month after it acquired West African gold miner Red Back Mining Inc. "[Red Back] further improved Kinross's per share growth potential," he said. Gold production is expected to grow to 3.9 million ounces by about 2015 from 2.2 million this year.

Kinross sharescould reach the $22-range over the next two or three months as they play catch up, Mr. da Silva said.

Iamgold Corp. also has upside, but has been a laggard, Mr. da Silva said.

But there is value in Iamgold's assets, and its stock is probably trading at a 30-per-cent discount to its peer group, he said. The stock could reach $22 a share by year-end, he suggested.

***

TOP EQUITY HOLDINGS IN MIDDLEFIELD PRECIOUS METALS CLASS AT SEPT. 30

Company Symbol $ Price Oct. 19 52-wk high $ 52-wk low $ YTD % price chg P/E % Yield Market cap ($-mil) Volume
Iamgold Corp.IMG-T17.2521.9513.174.552.30.46,414.02,123,813
Baffinland Iron MinesBIM-T0.961.090.3584.6N/A0329.21,241,698
Premier Gold MinesPG-T5.436.052.9029.9N/A0538.2289,128
Perseus Mining Ltd. *PRU-T2.813.211.50*N/A0968.4421,148
Rubicon MineralsRMX-T3.805.413.24-24.0N/A0811.5517,495
Semafo Inc.SMF-T10.8111.423.11144.036.002,905.23,714,175
Kinross GoldK-T18.2824.2015.34-5.627.70.612,866.77,928,301
Goldcorp Inc.G-T43.4548.3735.125.131.30.431,981.33,616,839
New GoldNGD-T6.687.553.3775.835.202,616.22,360,058
Canaco ResourcesCAN-X3.264.200.32515.1N/A0296.43,138,829
* Perseus Mining began listing on the Toronto Stock Exchange in February. Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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