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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: T-Lo Greens who wrote (93568)	2/14/2003 9:09:23 AM
From: DeplorableIrredeemableRedneck	Read Replies (1) \| Respond to of 116791

Sprott manager betting gold will top $500 Bullishness partly from expectation U.S. market will do poorly for next few years By ANGELA BARNES INVESTMENT REPORTER Friday, February 14, 2003 - Page B16 The price of gold bullion has already increased sharply, having climbed to $357.40 (U.S.) an ounce from a 20-year low of $253 in 1999, but fund manager Jean-François Tardif thinks the price will rise much further. "We think it is going to go north of $500 easily," said the senior portfolio manager at Toronto-based Sprott Asset Management Inc. The firm has recently bought a considerable amount of bullion. Sprott's play on bullion has already paid off handsomely. The Sprott Canadian Equity Fund, on which Mr. Tardif is secondary manager, rose 39.3 per cent in 2002, a year in which other funds in its class slipped an average of 12 per cent and the Toronto Stock Exchange S&P/TSX composite index lost 13.9 per cent. About 40 per cent of the fund's portfolio is in gold bullion and gold stocks. Mr. Tardif's continued bullishness on bullion arises in part from his expectation that the U.S. market will do poorly for at least the next few years, if not longer. "We believe we are in a secular bear market," he said. The U.S. market has already fallen three consecutive years, which last happened in 1939 through 1941. If it declines again this year, that will mark the first time since 1929 through 1932 that the Standard & Poor's 500-stock index declined four years in succession. Despite the stock market declines, many stocks remain richly valued, Mr. Tardif said. In further explaining his bearish view of the U.S. equity market and his bullish view on gold, he also pointed to the numerous problems currently besetting the United States, including the rising U.S. trade deficit, which is about 5 per cent of U.S. gross domestic product. Continued increases will raise the downward pressure on the U.S. dollar and could lead to higher U.S. interest rates. And that in turn could put the brakes on consumer spending in the United States. Consumer spending has provided the backbone of the U.S. economy in recent years. Also, there is the U.S. government deficit, which by the government's own admission could total $300-billion this fiscal year. Sprott's own estimate is even higher -- at close to $500-billion, even without factoring in the cost of a war on Iraq, Mr. Tardif said. Despite the recent softness in the equity market over all, the total market capitalization of all gold stocks taken together still accounts for a very small percentage of total global investment, he said. So even a small swing would have significant ramifications for gold and gold stocks. Among the stocks that the team managing the Sprott Canadian Equity Fund have recently added or increased positions in include: Nevsun Resources Ltd. (NSU-TSX). Shares of the Vancouver-based mineral exploration and development company have done well recently, having hit a 52-week high of $3.94 (Canadian) on Feb. 4 on the Toronto Stock Exchange. The 52-week low of 55 cents was set last March. But the team feels the stock "can go a lot higher," he said. Nevsun has projects in Mali, Ghana and Eritrea in Africa. The Mali project is the most advanced of the three. It has about 3.5 million ounces of gold resource and Mr. Tardif thinks the grade of the ore will prove to be higher than generally anticipated. He also said that production at the Mali site could begin in 2004 and the output could be about 200,000 to 300,000 ounces a year when the mine is fully operational. The stock closed yesterday at $13.70. Hurricane Hydrocarbons Ltd. (HHL-TSX). Among the factors that have drawn the fund managers to the Calgary-based oil exploration and production company that has operations in Kazakhstan is its valuation. Mr. Tardif says the team feels Hurricane has the ability to make $1 (U.S.) a share profit or more every quarter this year and yet the stock is only trading at $16.36 (Canadian). "That is very cheap," he said. Hurricane has been increasing its production, which is now about 165,000 barrels of oil a day. That could potentially rise to 230,000 b/d, Mr. Tardif said. The shares set a 52-week high of $25.70 last March, which is far above the 52-week low of $8.27 established in July. High River Gold Mines Ltd. (HRG-TSX). The Sprott management team continues to be a fan of the Toronto-based gold company. Mr. Tardif notes that some analysts estimate High River Gold can earn more than 30 cents a share this year, which gives the stock a multiple of 7.2 times earnings based on yesterday's close of $2.25. Some other gold plays trade at around 20 times cash flow, he said. The actual profit will depend on the bullion price. Furthermore, its consolidated production is growing, Mr. Tardif said. The 52-week high of $2.92 was set last June and the 52-week low of $1.01 in March. The team continues to hold "a good-sized position" in Energy Savings Income Fund (SIF.UN-TSX), a Toronto-based income trust mentioned in a May 17 Best Bets interview. Mr. Tardif says the distribution by the trust, which markets natural gas and electricity, keeps growing and he expects earnings from operations to also increase. The income trust is "looking at acquisitions; they are entering new markets, so the growth rate in the future should be very attractive," Mr. Tardif said. Best Bets outlines what professional money managers are buying and selling. abarnes@globeandmail.ca