Gavin Graham's Go-To Golds

07/10/2020 5:00 am EST

Focus: COMMODITIES

Gavin Graham

Chief Strategy Officer, INTEGRIS Pension Management Ltd

Gold is often referred to as portfolio insurance, partially because it is not correlated with many other assets, and also because the supply cannot be increased rapidly, unlike paper (fiat) currencies, asserts Gavin Graham, contributing editor to Internet Wealth Builder.

Franco-Nevada (FNV) invests in royalties and income streams generated by a variety of different precious metals and oil and gas. It has a large and diversified portfolio of cash-producing assets in Canada, the U.S., Australia, Africa, and Latin America.

The attraction of royalty companies is that they receive a percentage of the revenue generated from each ounce of metal or barrel of oil produced by the mines they have exposure to, but with no exposure to the costs and environmental liabilities involved in producing it.

Franco-Nevada remains a "buy" for the low-risk nature of its operations, its broadly diversified portfolio by geography and material, and the growth in its growth equivalent ounces (GEO through new operations and expansion of existing projects.

Agnico Eagle Mines (AEM) is a senior Canadian gold miner operating eight mines in Canada, Finland, and Mexico. It recently brought on two new mines in Nunavut, Meliadine and Amaruq.

Agnico remains a Buy for the growth in its gold production to over 2 million ounces annually in 2021, its portfolio of well-run mines in politically stable jurisdictions, and its well-regarded management.

Pan American Silver Corp. (PAAS) is the largest primary silver producer in the world with a diversified portfolio of producing assets in mining-friendly jurisdictions like Peru, Mexico, Canada, Argentina, and Bolivia.

Pan American remains a Buy for its widely-diversified geographical exposure to silver mining in mining-friendly jurisdictions, the benefit it will receive from higher gold and silver prices, and lower local currency operating costs in Latin America.

It also benefits from the potential of the reopening of the Escobal mine in Guatemala that it acquired through its acquisition of Tahoe Resources in 2019. Escobal produced almost as much silver as the rest of Pan American in the last 12 months of its operations in 2017-18.

First Mining Gold (FFMGF) and owns 7 million ounces of measured and indicated gold and precious metals resources in mining-friendly jurisdictions in Ontario, Quebec, and Newfoundland. With no production, it is purely an asset play, so it is both illiquid and volatile.

First Mining’s largest property, the Springpole mines, is one of the largest undeveloped open pit gold deposits in Canada. First Mining remains an interesting target for an acquirer looking for proven resources in mining-friendly jurisdictions.

At $9 per ounce of indicated gold, Fist Mining sells at a big discount not only to other North American developers ($38 per ounce average) but even to non-North American developers at $34 per ounce. It remains a speculative buy.

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