Robert Cohen, Vice President and Portfolio Manager, Dynamic Funds

FOCUS: Mining Stocks

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MARKET OUTLOOK:
Gold will perform well over the long-term given our outlook on negative real rates, global monetary reflation, continued ETF purchases, and the likelihood of a higher VIX (which is correlated with the gold price). Rising inflation will be thematic short to medium term and should overshadow FED rate hikes. While a FED rate hike on March 15th should only be a short-term headwind for the gold price. Global economic growth, will be short of expectations, and there is still a possibility of trade wars. The U.S. feels that their currency is overvalued against foreign currencies, particularly China and we believe policy will be tilted toward a weaker U.S. dollar. Of key interest is whether or not the U.S. policies send the world into an era of protectionism. Meanwhile, we are noticing that there is a plethora of government promises: healthcare, infrastructure, and trade expansion while trying to cut taxes. Something doesn’t add up, and we point to long-term currency debasement. Gold is the quintessential monetary asset that cannot be expanded. A devaluing dollar will be simply expressed as a higher gold price over time.

Top Picks:

Nexgen Energy (NXE.TO)

On March 6, Nexgen published their updated resource estimate on their world-class Arrow uranium project in Saskatchewan.  The resource now stands at over 300 million pounds grading 2.58 per cent U3O8, now making it the largest high grade uranium deposit ever discovered in Canada, surpassing Cameco’s McArthur River mine. The company will be completing their preliminary economic assessment in the third quarter. We believe further drilling will ultimately add another 100 million pounds to the resource. We were surprised at the market’s disappointment at the 49 per cent increase over the maiden resource of 200 million pounds, however the company was more focussed on conversion of inferred to indicated to be included in the upcoming preliminary economic assessment.

MAG Silver (MAG.TO)

MAG Silver’s principal asset is their 44 per cent interest in the world-class high-grade Juanicipio joint-venture with the world’s largest primary silver miner. The story continues to transform as they drill the Valdecanas Deep discovery continues to add significant resources and is giving the JV reason to increase the scope of the mine throughput. Currently, life-of-mine production is expected to be in the 475 million ounce range with extraordinarily robust economics.

Northern Star Resources (NST.AU)

Northern Star is one of Australia’s premier gold miners currently producing over 500,000 ounces per year of gold and organically growing to 600,000 ounces per year by 2018. They grew quickly through acquisition of mines that were previously owned by Barrick Gold and Newmont Mining. Mines such as their Jundee mine are getting bigger and bigger. The company is able to leverage off of existing infrastructure at their Kalgoorlie Operations with significant opportunities to expand production from known sources and bring other nearby satellite orebodies into production.

Disclosure Personal Family Portfolio/Fund
 NXE Y  N  Y 
MAG  N  N  Y 
NST  Y  N  Y 

 

Fund Profile: Dynamic Precious Metals Fund

Performance as of: February 28, 2017

  • 1 month: Fund -1.8%, Index*-3.0%
  • 1 year: Fund 28.7%, Index* 14.7%
  • 3 year: Fund 20.5%, Index* 2.5%

* Index: S&P/TSX Global Gold Index

* Returns provided must be net of fees!

Dynamic Precious Metals Fund Series A inception date January 1984. Robert Cohen has been the Portfolio Manager on the Fund since November 2000. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns including changes in unit values and reinvestment of all distributions does not take into account sales, redemption or option changes or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Website: www.dynamic.ca

Editor's note: A previous version of this story reversed the Nexgen Energy conversion of inferred to indicated. It has been altered at the guest's request.