Why This Miner Thinks Gold is in a New Bull UptrendBy Neils Christensen
Wednesday July 13, 2016 11:52
(Kitco News) - The gold market still has room to move higher even if it is overheating and probably due for a small correction, this according to one mining executive.
In an interview with Kitco News, Ian Ball, chief executive officer at Abitibi Royalties (TSX.V: RZZ), said that with so much global market uncertainty, gold should continue to perform well as a safe-haven asset. He added that he expects gold to outperform against other currencies.
“I think this is a great environment for gold,” he said. “Gold is money and in today’s market it is performing the way it should.”
Ball said that because prices have run up so quickly, rallying more than 26% since the start of the year, he wouldn’t be surprised to see a correction sometime in the near future; however, he added that he wouldn’t be too worried about a short-term decline given that the market is in a new bull uptrend.
However, with the precious metals market and mining sector continuing to heat up, the young CEO said that he is concerned that mining executives haven’t learned the lessons over the last few years. With capital coming into the cash-starved sector, he said that the early signs of fiscal discipline is going “out the door.”
“We have seen gold prices go up and what is the first thing you hear about? Deals being made,” he said.
Ball added that his plan as CEO is to buck the trend and to use free cash flow to buy back his company’s shares, a plan to create v alue for shareholders. The company is looking to buy back 546,300 shares.
“Over the next three years, we would like to see our outstanding shares go from 11.3 million to 10 million,” he said in a recent representation in Montreal, Canada. “That would increase everyone’s effective ownership in the company by 10%.”
He noted that his plan is working. The Abitibi Royalties stock price is up more than 174% year-to-date, last trading at $9.46 a share.
Instead of looking at potential overpriced acquisitions, Ball said that companies should be looking at developing new philosophies and embracing new technology to promote new exploration of their current properties.
He noted this is what Yamana Gold (NYSE: AUY, TSX: YRI) and Agnico Eagle (NYSE: AEM, TSX: AEM) are achieving at their joint Malartic project, one of Canada’s largest mines in the Abitibi region in Northern Quebec. Both companies have been allocating significant resources to explore relatively unchartered territory, known as Odyssey.
Ball explained that his company holds a 3% royalty in Odyssey property, which represents a significant source of growth for Abitibi Royalties given the exploration in the area..
“The Odyssey property is a testament to exploration and it is going to significantly add to the resources of Malartic,” he said. “All the companies are going to benefit because we have faith in our assets.”
Ball’s company has also done its part to embrace innovation in the mining sector, launching the Abitibi Royalty Search. Since early 2015, the company has been reaching out to property owners, offering to pay the fees and taxes for existing mineral properties or staking new mineral claims for a period of time in exchange for a royalty on the property.
Ball said that with the mining sector turning around, it looks like the program has run its course; however it has been a positive experience as, Abitibi Royalty has spent just over $200,000 for 13 royalties.
He noted that one of the last agreements to be signed was for a 3% royalty on property that is adjacent to Eldorado Gold’s Efemçukuru mine in Turkey. Ball said that he is excited about the potential as Eldorado is drilling and exploring near the two properties’ boundaries and there are indications that the deposit encompasses the entire area.