Gold is still up from around $1,300 a year ago and current uncertainty and economic responses look to create a potential perfect storm for precious metals ahead. We believe this is a geared, but lower-risk way than most, to play it… The sell off of gold in the past week is a dash for cash to cover trading losses elsewhere. But that will not last and you MUST have gold exposure. Golden Prospect Precious Metals (GPM) is a closed-end investment company aiming to provide investors with capital growth from a portfolio of companies involved in the gold and precious metals sector. It is focused on significant players in the sector, giving real exposure – a latest (January) factsheet showing it invested approaching 56% in producers, approaching 37% in developers and under 8% in explorers, with 76.7% gold exposure and more than 17% silver. Its top two holdings were West African Resources (ASX - WAF) - 9.09% of NAV - and Americas Gold and Silver Corporation (TSX - USA), (NYSE - USAS) – 7.21% of NAV, with the top ten holdings just over 51% of NAV and overall exposure to 57 issues. It also noted that in the month it “participated in a placing of equity by gold explorer Emerald Resources (ASX - EMR) and increased holdings in Wheaton Precious Metals” (TSX - WPM), (NYSE - WPM).
The board is led by Malcolm Burne, who has extensive company directorship experience in the sector, as well as financial markets and financial journalism experience. At the 2019 half-year he had 537,500 shares in the company and topped up in January this year. Director remuneration is £16,000 per annum. The investment manager is New City Investment Managers (a trading name of CQS – an approaching $20 billion global multi-strategy asset management firm). The management fee was reduced from 1st July 2019 to 1.25% per annum on the first £20 million of NAV and 1% on net assets above that, with a performance fee entitlement removed. The previous results were to 30th June 2019 and showed a net asset value up by 31.8% over the six months to 32.40p per share (£18.47 million). There were liabilities of £1.7 million, with cash & receivables totalling £0.4 million. A latest Net Asset Value update showed NAV per share of 29.61p.
As such an investment company, the key risks looks to be in the sector’s and companies performances. On the latter, with portfolio managers supported by the significant CQS analysis capabilities and the company under the stewardship of, particularly, the experienced Malcolm Burne, we are comfortable. Of course though, a good performance still likely requires an at least ok pricing backdrop. There is some downturn protection with the ‘closed-end’ nature, though we believe the pricing backdrop may be far better than just ok…
The company’s January factsheet included; “Events were subsequently dominated by coronavirus news with an expected economic slowdown, a result of the clamp down on travel to limit the virus’ spread which weighed on industrial commodity prices. Gold, however, was one of the best performing metals over the month, rising 4.7% in US dollar terms, with the virus providing yet another reason for central banks, including the FED, to maintain accommodative low interest rates and Chinese authorities to extend support to businesses during the slowdown.” That situation has now significantly accelerated – with, internationally, increasing ‘lockdowns’ and monetary ‘relaxation’. However, this is coming from an already economically-troubled base and we suggest the uncertainty and further monetary actions play perfectly into the hands of safe haven-considered precious metals. With this a lower-risk way to play the theme, we look for a decreasing discount to an increasing NAV and, up to 30p, a Gold buy.
This first appeared on the N50 website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website for a share tip from Tom & Steve JUST OUT THIS MORNING and a new shorting piece soon click HERE
Filed under: Golden Prospect Precious Metals, Versarien, FCA, ITV, Hyve Group, N50 website
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