Adrian Day, Founder of Adrian Day Asset Management and manager of the Euro Pacific Gold Fund, joins us to focus on the macro drivers for the gold price, and how that relates to gold stocks and precious metals royalty companies. We start by recapping the big changes in Fed policy from last year to this year, with the shift to monetary tightening in the prior year, and now the anticipated shift to monetary loosening. The discussion then shifts to what factors he feels will cause gold and PM sector to have a sustainable breakout; getting into monetary issues, geopolitics, and supply/demand factors.
Next we pivot over to the environment for the larger royalty companies in the sector like Franco-Nevada (FNV) and Wheaton Precious Metals (WPM), and how the types of transactions they did decades ago have shifted over time to the present environment. Adrian also weighs in on how is viewing the environment in some of the smaller to mid-size royalty companies, like Elemental Altus (ELE.V), Altius Minerals (ALS.TO), and Orogen Royalties (OGN.V) that utilize a prospect generator model to build baskets of royalties, and if we’ll see more consolidation in the sector and more merger and acquisition transactions.
This ties into a discussion on M&A in the gold mining stocks and which companies will be acquired, and which juniors may be next in the ongoing theme of 2 nearby junior companies combining into larger companies of scale and size. Adrian highlights the potential synergies between G2 Goldfields (GTWO.V) and Reunion Gold (RGD.V), as well as Aurion Resources (AU.V) and Rupert Resources (RUP.TO) as ones he has his eyes on due to their proximity. The topic is discussed of whether strategic stakeholders are a good thing, or can also be a prohibitive things in future acquisitions.
Wrapping up Adrian outlines the types of companies that he feels most attractive in today’s environment, with the key themes being the larger precious metals royalty companies, gold producers, and gold juniors that actually have some revenues coming in or the adequate access to capital. He sees bargains across the board, but reminds investors to still be selective as not every company will rally in a precious metals bull market.
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