miraj_stokespresentation

8/8/2019 miraj_stokespresentation

http://slidepdf.com/reader/full/mirajstokespresentation 1/42

Miraj International Investment

Limited

The Benefits of Gold Equities

for Portfolio Diversification

MIRAJ GOLD & PRECIOUS METALS

Private Portfolio Discretionary Account Management

www.miraj.com Tel: 514.876.0144 Fax: 514 875 8967



MIRAJ GOLD & PRECIOUS METALSPrivate Portfolio Discretionary AccountManagement 2

Making the Case for Gold &

Precious Metals




³A strategic position in gold should prove

rewarding over the long haul.´ Gold stocks

- trading at their lowest level in 25 years when compared with the

underlying price of bullion.

- the least economically sensitive among commodities

An environment of rising volatility favours large cap stocks over

small caps.

From a fundamental perspective, we continue to favor gold

companies with improving production and cost profiles, gold reserve

upside, active exploration programs and strong management teams. Gold equities that we believe offer investors a combination of these

characteristics




Introduction:Today·s investor must contend with

- Low bond returns and negative real interest rates

- Unpredictable equities- A sliding US$ and rising US deficits. The weak US

economic growth is exacerbating trade deficits

- Geopolitical tensions, with deteriorating conditions

in the Middle East, and North Korea nuclearstalemate

- The emergence of inflation / deflation




Introduction: Making the Case for

Mining EquitiesMining equities offer investors

- 3x the performance of underlying commodity prices

- Mining shares have similar diversification benefits tocommodities

- Returns through dividends. Typically around 0.5-0.7% for gold equities

- Value creation above the cost of capital through

exploration and project development, merger &acquisition, cost cutting, technological innovations- Downside protection via low production costs, by-

product revenues, natural currency hedges




Putting Today·s Gold Price in

Perspective?

In the early 1970·s, the US was stuck in theVietnam war and started to print money

- Today banking and financial crises and the Fed hasbeen printing money like crazy over the past sevenyears and now much more money is printed intrillions

Melt down of the global market




Putting Today·s Gold Price in

Perspective?

The US baby-boomers· appetite for commodities is nowbeing replaced by the insatiable Chinese- The US ran its first current account deficit in the early 1970·s

at US $4bn a year it is now US $80 billion a month

In 1971, Charles de Gaule gave the American·s backtheir dollars and asked for the gold equivalent (at thetime the US$ was convertible into gold) « effectively

triggering a massive depreciation in the US$ whichlasted from 1971 to 1979- What will happen when the Asians start selling their US $2

trillion in US $ reserves and investing in gold.




Opportunity vs. Risk

Opportunities

Consolidation

Low Real Interest Rates

Japanese Buyers

Cash Flow Multiples RemainLow

Gold Stocks Offer 3 to 1Leverage Over Bullion Price

China Powerful DomesticPolicy

Risks

Large Central Bank Sales otherthan what agreed

Very strong U.S. Dollar

U.S. Government Stops DeficitSpending

High Real Interest Rates




Life Cycle of a Mining Share




The "Five M's" For Picking Gold

Stocks

By using the Five M¶s, Miraj investor canbuild a simple but powerful model to initially

sort through the many hundreds of upstart

gold companies to find better opportunities.




1. Market Cap

We measure a company·s market cap against its

production level, reserve assets, geographiclocation and other metrics to establish relativevaluation.




2. Management

Some of the most successful company buildersin the gold-mining industry are ´financial

engineersµ ² people who have the relationshipsand understand the capital markets and whoknow how to hire the best geological andengineering teams.

We seek out solid management with a goodtrack record.




3. Money

The gold-equities market is efficient at judging

reserves per share.




4. Minerals

Gold companies have the highest industry valuationsbased on price to earnings, price to cash flow, price toenterprise value and price to reserves per share.

Companies operating mines that produce gold and asignificant amount of another metal (typically copper)tend to have lower valuations than pure goldcompanies. But at the top of a gold price cycle,

copper/gold deposits end up rising to the samemultiples as pure gold companies.




5. Mine Lifecycle

We analyse the mine·s lifecycle broadly.




Private Portfolio Discretionary AccountManagement 16

What MIIL Miraj Searches for:

Companies with the best portfolio of projects in thedevelopmental pipeline and who are aggressively tryingto grow their reserves through organic growth and M&A

activities. How much production and at what cost are they

projecting to add next year, the year after.

Are they aggressively seeking to grow the company?

These gold mining companies are planning on raisingproduction levels through organic growth andincreasing their reserves by acquisition of other goldproducing companies and post discovery resourcedefinition juniors.





We look for undervalued situations no matterwhat the gold price as the Miraj formula for

investing in mining stocks. The common-senserules of investing are as written in stone formining investments as they are for investmentin any other industry. We check out thebalance sheet:

- cash in the companies treasury- cash flow from operations

- working capital

- free cash flows

What MIIL Miraj Searches for:





Miraj·s Two Metrics

At Miraj we define an undervalued stock is based on two metrics.

1. Market cap per ounce.

- The market capitalization of a company isthe number of shares times its price. Youdivide that by its ounces of production andits ounces of proven and probable reserves,

and you see how the company·s datacompares to the industry·s weightedaverages.





Miraj·s Two Metrics

2. Operating cash flow multiples.- Take the difference between the gold price

and the cash cost to produce an ounce,multiply that by the company·s productionper year, and you get operating cash flow.Divide that into its market capitalizationand you get its operating cash flowmultiple. We look at that this much thesame as one looks at earnings per sharemultiples in other industries.





How does MIIL select which companies meet

its gold investing objective?

Successful gold investing depends on manyfactors.

Chief factors considered by MIIL·s investment

manager in gold investing:- the ore quality of metals mined by a company

- a company·s mining, processing and fabricating costsand techniques

- the quantity of a company·s unmined reserves- quality of management

- marketability of a company·s equity or debtsecurities





Miraj Investment Approach

The industry averages on December 29,2008 for the 50+ gold miners we follow

(which is everyone of significance) : theaverage market cap for an ounce ofproduction was $3,634, an ounce ofproven and probable reserves was $194,

and the average operating cash flowmultiple on forecast 2009 production,assuming $900/oz gold, was 7.4X.






Gold mining will be one of the few industriesdoing well in 2009.

- Key cost is oil, which is about 25% of the cost ofrunning a mine. Oil·s price, as we know, is downabout 75% in the $147/barrel high last July. At theaverage $400 cash cost per ounce mine, that·s a cutof about $75/oz off their costs. That result alone isgoing to give them an uptick in future earningsversus what they showed for third quarter 2008.






To recognize that currencies are also falling; many aredown 20% to 40% versus the U.S. dollar. All thecommodity nation currencies³the Canadian dollar, the

Australian dollar, the South African Rand, the BrazilianReal, the Mexican Peso³they·re all down 20% to 40%.When your mining costs in those countries aretranslated back into U.S. dollars, they·ll be 20% to 40%lower.

When you put falling costs of production together witha rising gold price, you·ve got a winning combinationfor the stocks in 2009.





A Mine Life Cycle Approach

to Picking & Investing in Gold Stocks

Value

Mineral Market Cap

Mining Cycle

Increasing reserves

Increasing production Increasing cash flow





Miraj Portfolio Objectives

To enable investors to participate in the goldand to a lesser extent precious metals sector

through direct investment in these metals

The primary objective of the Miraj Gold &Precious Metals Private Portfolio is to provide

competitive long-term total returns thatexceed returns on the appropriate benchmark,and at a lower risk





Miraj Portfolio Objectives

Superior performance is to be achieved throughinvesting in a global universe of stocks thathave been thoroughly assessed for assetquality, long term growth potential, andfinancial and strategic soundness

This strategy emphasizes investment in major

producers with a broad asset base, mediumcapitalizations, and with primary listings onmature stock exchanges with high liquidity





Investment Strategy:

Best in Class Companies

Clear and sustainable competitive advantage.

Proven management ability - a track record of

achievement against specific objectives &management accountability.

Market leadership, or the distinct ability andopportunity to emerge as a market leader.





Miraj Gold Favorites

The performance of mining company shares can

be adversely affected by a host of factors suchas stock market volatility, geopolitics,

environmental issues, management capability,

financial strength, mine life, productivity,

increases in operating costs, energy suppliesand hedging policies.






From a fundamental perspective, we continue to favor

gold companies with improving production and cost

profiles, gold reserve upside, active exploration

programs and strong management teams.

Selectively buying gold mining companies, very

selectively, and we make sure those companies are not

big base metal producers.






Agnico-Eagle

Alamos Gold

Anatolia Minerals AngloGold

Ashanti

Aurizon Mines Avoca Resources

Barrick Gold

Centerra Gold

Central African Gold

Coeur d'Alene Eldorado Gold

Gold Corp.

Gold Fields






Golden Star

Harmony Gold

Iamgold Jaguar Mining

Kinross Gold

Lihir Gold Linux Gold

Newcrest

Newmount Mining

Randgold Red Back Mining

Royal Gold

Sangold Yamana Gold





One analytical method

Take the total resource

(indicated and inferred)and determine how

many ounces you as an

investor are receiving

per share or per dollar invested

Capital expenditure

A mine has great capitalexpenditure involved in theroads, buildings, machinery,housing, power and water systems. Additionally, inmost cases the explorationcosts were higher becausethe project had to be takento feasibility and the mineput into production.

Other Considerations:





Open Pit

can be easier to put

into production andfar less capital

intensive than an

underground mine.

Underground Mine

To be economic, it

must have muchhigher grades for the

project to be

worthwhile

Open Pit vs Underground Mine

In any given situation:

What type of deposit are we looking at?





Thus Discovery { Development





10 Year Gold Production





Value of M&A Activity





Gold Market

Strong demand- Investment demand

ETFs= new investmentvehicle

- Fabrication demand

Supply constraints- Lower production

- Depletion rates- Lower central bank

supply

Financial marketvulnerability

- Economic imbalances(rising debt levels,deficit levels)

- U.S. dollar weakness

-Inflation/deflation

Geopolitical risks





Equities for the Gold InvestorEquities may provide investment opportunities arising from:

Leverage- Mining companies· profits are

proportionately moresensitive to gold pricevariability (profits are net ofthe costs of mining)

- Gold shares tend tooutperform bullion in goldbull markets/under performin gold bear markets

Security valuations- Equities may be ´cheapµrelative to historical prices

- Equities may offer value vs.relative to underlyingcommodity prices

Corporate activity (valueadded through corporatemanagement)- M&A activity

- Technical expertise

Vertical diversification- Exploration

- Development

- Production Flexibility

Global exposure





Investment Process

Seeks long-term capital appreciation

Invests primarily in common stocks of gold-miningcompanies- Stock selection emphasized with top-down overlay

- Identify low-cost mining companies who can build reserves andraise production levels

- Focus on unhedged producers (for gold price leverage)

- Tailor to commodity outlook- Adjust leverage to bullion when needed

- Monitor exposure to political risk





Investment Approach





Evaluating Gold Stocks

Revenue

Earnings

Ounces Produced

Ounces Sold

Gold Producers Stock Index

Time Saving Layout

Research already done

100% Independent and

Unbiased

At-a-Glance Reports

Detailed Business Summaries

Performance Ranking

Numbers

Production and Reserve

Reports

Production and Reserves for

each mine



For more information:

Miraj Gold & Precious Metals

Private Portfolio Discretionary Account Management

Please visit our website: www.miraj.com

1155 René Levesque Blvd West, suite 2500

Montreal (Quebec) Canada H3B 2K4

Tel: 514 876 0144 - Fax: 514 875 8967

[email protected]

miraj_stokespresentation

Documents