What we are looking for?
What money managers are buying. You can check out the top holdings in their funds to find stock ideas, or gain more insight into their investments. Today, we look at BMO Precious Metals (bmo.com).
More about the fund
Mark Serdan of BMO Asset Management Inc. took over the $147-million precious metals equity fund in late 2009. The fund posted a 59-per-cent return in 2010, which is in line with its peer group average. Over 10 years, the fund has posted an average annual return of 20.4 per cent.
The manager, who invests in both junior mining companies and larger producers, is still bullish on the gold sector despite the falling commodity price this year. Gold futures closed Wednesday at $1,332.10 (U.S.) an ounce in New York after peaking at more than $1,400 late last year. "This is a normal consolidation phase," Mr. Serdan said. He expects the gold price will resume its upward trajectory by the fall.
Gold has taken a hit from profit-taking, while investors have also been rotating out of this safe-haven sector because of some positive U.S. economic data, he said. "When the U.S. economy recovers, however, it is going to come with a great amount of continued spending by that country so eventually we will have inflation concerns. That is bullish for gold longer term."
What did we find?
Triple-digit gains in five stocks, and some red ink for Kinross Gold Corp., whose stock has come under pressure from digesting its acquisition of Red Back Mining Inc.
Allied Nevada Gold Corp., a producer of gold and silver from its old Hycroft Mine in Nevada, has more upside despite its robust return already, Mr. Serdan said. By late 2012, gold production is expected to grow to 275,000 ounces a year, while silver production should reach one million ounces, he said. Gold production could also jump to 600,000 ounces a year, and silver to 22 million ounces if the company can develop its sulphide ore resource, he added: "If they are able to extract the silver from the sulphide material along with the gold, then it would be a catalyst for a higher stock price." He also likes the fact that the company has a proven management team whose members are former executives with Kinross Gold. He has an 18-month price target of $42 to $44 on Allied stock.
Orezone Gold Corp., which is exploring for gold in West Africa, also has more potential, he said. Its management team, which oversaw the sale of the Essakane gold mine in Burkina Faso to Iamgold Corp. two years ago, is now developing its Bombore gold deposit in the same country. "They came up with a resource update in the fall of 3.5 million ounces," he said. "We would expect a five-million-plus ounce deposit towards the end of the year." Orezone also has a uranium deposit in Niger, but that hasn't been given any value by the market, he said. He has a 12-month price target of about $5 a share on Orezone.
He also likes Keegan Resources Inc., a junior miner with two gold projects in Ghana. Its stock has been under pressure because of dilution of its shares after raising $185-million in a bought deal, he said. Its flagship property, Esaase gold deposit, should grow to five million ounces within 18 months, he said. It also has the Asumura gold property near Newmont Mining Corp.'s Ahafo gold mine. "If they get any success with Asumura, it could look very interesting to Newmont," he said. Keegan shares could hit $11 a share over 18 months, he added.
TOP 10 EQUITY HOLDINGS IN BMO PRECIOUS METALS AT DEC. 31, 2010
|Company name||Symbol||$ Price(Feb. 1)||52-wkhigh $||52-wklow $||1-year %price chg||P/E||% Yield||Marketcap ($-mil)||Volume|
|Rainy River Resources||RR-X||11.68||13.50||4.30||126.8||N/A||0||878.6||125,245|
|Allied Nevada Gold||ANV-T||27.32||29.17||12.40||86.7||38.5||0||2,407.8||230,304|
|*Tahoe Resources went public in June, 2010. Source: Globe Investor|
© 2007 The Globe and Mail. All rights reserved.
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