Gold Miners: Focus On Organic Growth And Clean Balance Sheets - Ian Ball
(Kitco News) - While investor interest in the mining sector remains lackluster, one mining-sector CEO said that is not what companies should focus on; instead, they should continue concentrating on organic growth and improving their balance sheet.
Ian Ball, CEO of Abitibi Royalties, said that although the mining sector faces fierce competition for investor dollars from marijuana stocks and cryptocurrencies, he is confident that capital will return if companies continue to show value.
“The market has gone flat; it is kind of boring, but I don’t think it is a bad time to be in the mining sector,” he said in a telephone interview with Kitco News.
Ball’s comments come as gold futures have managed to bounce off four-week lows but continue to trading near the lower end of its trading range. June gold futures last traded at $1,320.10 an once, up 0.54% on the day.
Meanwhile the VanEck Vectors Gold Miners ETF (NYSE: GDX) also remains range bound, last trading at 22.98 a share.
Despite a “flat” marketplace, Ball said that there are still opportunities in the sector. In particular, he said he likes what Yamana Gold (NYSE: AUY, TSX: YRI) has does in the last few years improving their production while managing their balance sheet. Abitibi Royalties is invested in Yamana, which operates Canadian Malartic mine with a 50/50 partnership with Agnico Eagle (NYSE: AEM, TSX: AEM).
“I think Yamana is a good example of what the mining sector needs to do. In the last few years they sold off noncore assets to clean up their balance sheet and have been focused on their organic growth opportunities,” he said. “You can’t control the market, but you can control your execution.”
But its more than just one company, Ball said that he sees the sector as whole taking their balance sheet and cash flows more seriously, which will attract investor attention eventually.
“I am seeing the most discipline in the mining sector within the last 20 years,” he said.
Along with looking at companies with solid growth prospects and a clean balance sheet with positive cash flow, Ball said that his firm continues to see a lot of potential in Canadian projects. He added that Canada gold market is seeing its best average gold prices as the currency continues to weaken against the U.S. dollar.
In particular, Ball said that Abitibi Royalties is excited about the growth potential from their royalty agreements with the Malartic mine, he added that his firm will start to receive some capital from the mine in the fourth quarter and exportation on other royalty properties, East Malarctic and Odyssey, are moving full steam ahead.
“East Malartic is the newest discovery, and it has come out of know that is showing great potential,” he said. “Those two properties have gone from having no ounces two years ago to now having four million ounces. The development of East Malartic and Odyssey is working out exactly the way we expected it.”