The Timing Could Not Be Better
Just the other day an article from Reuters entitled ‘Paulson nears launch of investor alliance to shake up gold sector’ made me stand up in excitement. This activism, as Reuters call it is unprecedented in the market but honestly fits the character of Paulson. This news is ground-breaking for the gold market and for the mining sector in entirety. The mining sector has found a champion in the man that amassed $4 billion in the biggest trade ever: credit default swaps from the fraudulent mortgage crisis created in the 2000’s.
This summer we are standing just ahead of the curve patiently watching the Golden Triangle in Northern BC about to swell with results and hard data. The old historic mines that sparked gold rushes from the Klondike are being readied and those in the know are trying to sit still awaiting news. Talk to geologists, watch interviews, read research reports that are not on mainstream news and the possibility or rather probability for discovery is profound. This is not a secret. Many, myself included are shouting to anyone that will listen about the opportunity in resource rich Canada. Major producers like Newmont, Goldcorp, Barrick, Teck are currently drilling, and many prospect generators have raised their money and amassing hard data, right now from their well researched targets. That news is not far off I know this region will have incredible results and now we have support in a massive way from a mythical figure of the 2007/2008 meltdown.
John Paulson created the now $8.7 billion hedge fund Paulson & Co and is creating a core group of investors to work together to drive change and returns from gold mining companies. Paulson has been a strong advocate and investor in gold and he has assembled a group to drive change. Paulson & Co manage was founded in 1994 and held $36 billion in assets at its peak in 2011. Losses in its funds as well as investor redemptions have contributed to the decline and now much of the money belongs to Paulson and his associates. Critics of Paulson are quick to point out that he has not been right for a while, but I will gladly take small loses every year for giant black swan gains, but I respect people making high probability positions for asymmetric gains as Nassim Taleb would put it.This new association with about a dozen investors will include Delbrook Capital, Livermore Partners and Tocqueville Asset Management. (Delbrook confirmed to Reuters that it will be part of the group)
On top of that mammoth investment management BlackRock Inc which manages $6.3 trillion in assets and Van Eck Associates, two of the biggest mining sector investors, are also in discussions to join the group of hedge funds and institutional investors, Reuters report. This is unique because there has never been a targeted approach to turning around a sector like this and the timing could not be better. We all know that the markets move in cycles, and despite that being a broad statement the Canadian gold-mining index has lost 40 percent of its value in the past decade while gold has risen 46 percent in the same period.
The group will begin by releasing research reports on the gold mining sector and working to draw attention to the mining industry; something I advocate. There is a great divergence in commodity gains in price that are not reflected in many of the stocks of the companies. This seems like a strong case for an arbitrage trade. The market has a mismatch of pricing. The reason for this divergence is varied and can be simply lack of interest by the retail market, which is largely too big to invest in exploration of mines; or perhaps mismanagement in the sector. From my experience it is not a mismanagement problem; although, global mining has greater risk countries like Australia, the US and Canada have strong and fair mining regulations. Too many investors are not aware of the incredible need for mining and its role as the foundation for technology. Not only will this bring more accountability to the giant producers it will shine a massive spotlight on a sector that is primed for growth. There are going to be incredible stories in gold, copper, lithium, cobalt and vanadium soon and knowing that there will be a syndicate informing the public and working as an advocate for the sector is monumental. This is the perfect time for a retail investor to get in ahead of the curve in a sector so many have neglected.
SGC will push gold mining companies to make changes in capital allocation, compensation and corporate governance, as well as aim to raise the sector’s profile among mainstream investors.
Others joining the fund will include Kopernik Global Investors, Adrian Day Asset Management, Apogee Global Advisors and Equinox Partners. SuperChargedStocks and In Ahead of the Curve were not asked to join the group….yet! (wink)