Commodity Capital MidasLetter Opportunity Fund Early Investments in Emerging Resource Companies PORTFOLIO ADVISORS LIMITED
Commodity Capital MidasLetter Opportunity Fund
Early Investments in Emerging Resource Companies
PORTFOLIO ADVISORS LIMITED
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Investment Objective
Superior returns through investment in early stage and advanced exploration companies with management that consistently delivers shareholder value through project acquisition and exploration.
•Primarily TSX and TSX Venture Listed Companies; •Emphasis is on Precious Metals •Active portfolio management to manage against risk due to increasing volatility; •Seed, Secondary, and Pre-IPO Private Placment Financings
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PORTFOLIO ADVISORS LIMITED
Investment PhilosophieInvestment decisions due to the mine life cycle
Source: Newmont; Minefinders, own Illustration
Exploration Focus• High Risk• Potentially High Value
Corporate Focus• Joint Venture Opportunities• Lower Risk
Greenfields Pre-Discovery
1 – 2 Years Discovery
2 – 3 YearsFeasibility &Permitting
Depletion2 Years Development
1 Year Start-Up
Speculative StockAhead Of Known Value
SpeculatorsLeave
Full Value
Institutional Investing Begins
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Early Mover Advantage:- Limited Information- Portfolio Approach
Development Projects:- Permitting Issues- Lack of Operating/
Technical Skills- Capital Constraints
Mergers & Acquisitions:- Strategic- Synergistic
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Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Investment Strategy
Focus on Precious Metals Explorers/Producers Listed on Cana-da’s TSX and TSX Venture Exchanges
•Up to 30% Into Pre-IPO Companies with Proven Management; •Up to 60% Into Secondary Offerings in Advanced Companies; •Up to 20% Into Free Trading Shares Where Market Mis-pricing creates value opportunity; •Up to 100% Into Precious Metals in the Event of a Crisis
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PORTFOLIO ADVISORS LIMITED
Example for an investment
Nevsun – From explorer to producer
Succes in explorationOn the way to productionDevelopment
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Investment Strategy
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PORTFOLIO ADVISORS LIMITED
Example of an investment
Uranium Energy – The new Uranium producer
Start of Production in October
Exploration success
Moment of Investment
Development
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Typical Investment: Publicly Listed Company
MidasLetter Invited into private placement
MidasLetter exits investment
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PORTFOLIO ADVISORS LIMITED
Example for an investment
ATAC Resources – Successful exploration company in the Yukon
Site visit and investment
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
TypicalInvestment:Pre-IPOfinancing
MidasLetter invited to participate in pre-IPO financing.
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PORTFOLIO ADVISORS LIMITED
Example for an investment
Golden Minerals – Successful silver exploration company in Mexico / Argentina
Investment
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Investment Strategy: Private company, CPC or Inactive Shell
MidasLetter first invited into ReMac Zinc at $0.20 prior to name change. (Inactive Shell)
Second MidasLetter investment participation at $0.67 on March 21, 2011
Thanks to our site visit and subsequent relationship with drillers, we were aware ahead of the market that the drilling results were not looking good.
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PORTFOLIO ADVISORS LIMITED
Investment Process
Fundamental AnalysisStock-picking
Quantitative (NPV, Mcap/oz., in-situ value)Qualitative (Management, local visits)Geology
Mine life cycle
Technical analysis
Sector- and Country rotation
Seasonal trend model
Exclusion of political instable Countries
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Investment Strategy: The MidasLetter Advantage
• Due to the high level of exposure brought to public companies by James West’s visibility and audience, public company entrepreneurs seek his early participation to assure an audience when the company goes public.
• Eager to maintain a favourable impression with the MidasLetter audience, companies invite us to attend site visits with analysts and/or privately with our own geologists.
• We focus on building relationships on such site visits with the people on the ground so we have a direct pipeline of information into all levels of the company: Investor relations, senior management, institutional investors, and technical staff on the ground.
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PORTFOLIO ADVISORS LIMITED
Explorer and Junior Mines are coming producers New discoveries are solely from small cap and junior mines Majors have a lack of qualified experts and qualified exploration
targets Majors have to replace produced gold Junior Mines and Explorer are takeover targets Explorer and Junior Mines do outperform in a bull market
Majors vs. Junior or Explorer?Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
MidasLetter Opportunity Fund: Why Invest Now?
The spread of sovereign debt deterioration due to excessive borrowing versus dimnishing tax base means opportunity for precious metals investors:
•Central Banks are net buyers of gold; •Gold and silver investment by small individual investors is on the rise. •Major companies are unable to replenish produced ounces without buying junior companies at increasing valuations; •Majorinvestmentbanksareholdingrecordprofits,willingtofinanceadiminishingqualityofprojectflow; •Global rates of discovery are going down.
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PORTFOLIO ADVISORS LIMITED
Controlling
Money Management Buy and sell pyramidRisk controlling by “stop loss techniques”
Permanent controlling of the Value at risk through a mathematical model
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Advantage of MOF over other funds
•Solid relationships with companies and C-suite staff; •MidasLetter’s repuation as authoritative information source means we are able to drive retail and institutional investors towards our investments as they mature; •We get the pick of the crop when it comes to start-up vehicles; •We have an insider’s view of the companies as they progress ; •We pay an average lower cost of entry in line with founders and stage investors. •Both the fund manager and the portfolio advisor have focused experience in the emerging resource company space.
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PORTFOLIO ADVISORS LIMITED
Investment body of arguments
In the following body of arguments, gold is used as a synonym for the perspective and devellopment of precious and basic metals.
Increasing Demand Decreasing Supply Physical Gold vs. Gold Mines
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
The Fund Manager: Tobias Tretter
Tobias Tretter has been active in capital markets for 14 years and focused on investment in emerg-ing commodity companies since 2000.
Tobias got his first practical experience as a trainee of Credit Suisse AssetManagement. Later he worked for the Dr. Jens Ehrhard Group – an asset management group with ~US$14 billion assets under management. He supported the management of the DJE Gold and Resources Fund and re-ceived the award for best performing Gold Fund in 2003.
From 2005 to 2008 he co-founded and co-managed the Stabilitas commodities funds, which re-ceived the distinction “Best Performing Gold Fund” in 2006.
In addition to this, he founded his first own fund (LBLux Sicav Fis Junion Mining). Since 2009 Tobias is the CIO and CEO of Commodity Capital AG, Zurich. He is responsible for the Commodity Capital Global Mining Fund and the Set up and supervision of Commodity Capital’s indices.
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PORTFOLIO ADVISORS LIMITED
Extreme underweighting in commodities
Source: own illustration, McKinsey & Company, IMF, Barclays
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
The Portfolio Advisor: James West
James West has been a capital markets entrepreneur in Canada and the United States since 1990. He founded Elgrande.com Inc., and early competitor to Amazon.com, which achieved a US$200 mil-lion market capitalization. He established boutique Corporate Finance company Resourcex Financial Group in 2004 and before founding the newsletter, Midas Letter.
He established the MidasLetter in 2008, which in three short years became Canada’s most authorita-tive independent voice in the emerging resource sector with a reputation for impartiality and objectiv-ity. MidasLetter’s 6,000 global subscribers include investment advisors, fund managers, investment bankers, public company CEO’s, geologists, mining engineers, and individual high net worth inves-tors.
James West is a frequent guest on Canada’s Business News Network, where he is a recognized expert on gold, silver, commodities and emerging public companies on the TSX and TSX Venture Exchanges.
His relationships within the global emerging resource sector stem from his roles in the last twenty years as CEO, corporate development, financial marketing advisor, investor relations services com-panies, and relationships with the global institutional investment community.
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PORTFOLIO ADVISORS LIMITED
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Fund Structure
SICAV Fis (UCI) : A Fund Vehicle under the Luxemburg law of 13th February of 2007RegulatorilysupervisedbyCSSF(Luxemburgfinancialauthority)
Capital structure:The share capital structure can be very flexible. The minimum capital required for a SIF amounts to EUR 1.250.000. This amount must be reached within twelve months of receiving approval from the CSSF. Every subscriber needs to be a sophisticated or institutional investor and needs to invest a minimum of 125.000 € or equivalent.
AuthorisationA SIF may start its activities before approval by the CSSF, provided that within a period of one month fol-lowing the creation of the SIF an application for approval is filed with the CSSF.
Custodian: The custodian’s role is restricted to the safekeeping and general supervisory functions and has to be done by a bank supervised from Luxemburg financial authorities (CSSF)
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PORTFOLIO ADVISORS LIMITED
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Fund Structure
Valuation, accounting and reportingThe terms and conditions applicable to the subscription and/or redemption of shares or units of a SIF will be the ones described in its Issuing Document, implying a softening of the regulation and supervision by the CSSF relating thereto. As regards the valuation of the assets of a SIF, the SIF Act requires that this valuation be made in accordance with the accounting principle of “fair value”.
InvestmentsThe SIF Act grants increased flexibility in terms of eligible assets. A SIF may invest in transferable secu-rities, money market instruments, real estate, hedge funds, funds of funds, private equity, commodities, financial derivative instruments, debt instruments, microfinance, etc. SIFs will remain subject to the prin-ciple of risk spreading.
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PORTFOLIO ADVISORS LIMITED
Goldmines vs. Dow Jones Industrial
Outperformance of Gold Mines vs. DJ Index in deflationary and inflationary trends.
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Fund Structure
Name
TypeAdministratorInvestment AdvisorCurrencyMaturityUpfront FeeManagement FeePerformance FeeMaintenance FeeCustodian FeeMinimum InvestmentDistribution markets
Commodity Capital Sicav Fis Midas Letter Opportunity FundSICAV Fis (Luxemburg law)Hauck & AufhäuserMidasLetter Portfolio Advisors Ltd.EUR, CADOpen EndUp to 5%Up to 1% Annually20% with HWM1%0.08 % annually€125,000 or Equivalent $CADLuxembourg, Germany, Canada
PORTFOLIO ADVISORS LIMITED
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Shrinking Gold production
Source: GFMS
Investment Philosophie
Investment in Commodity Companies All Commodities Focus on Precious Metals
Main Focus: 30 % Majors 50 % Junior Companies 20 % Exploration Companies
Seasonality Consistent Money-/ Risk Management Currency Hedge
Contact Information
Commodity Capital AG Talacker 35 PO Box 2435 8022 Zürich Tel.: 0041 71 9111 811 Fax.: 0041 71 9111 831 Mobil: 0049 178 450 9022
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PORTFOLIO ADVISORS LIMITED