Gold prices are down, but the prospects for fully funded development stories are up. In this interview with The Gold Report, Canaccord Genuity Analyst Joe Mazumdar shares the stories that are moving forward despite the downturn in commodity prices, and names some companies that could be the next takeover success stories.
Joe Mazumdar joined Canaccord Genuity in December 2012 from Haywood Securities, where he also was a senior mining analyst focused on the junior gold market. The majority of his experience is with industry including corporate roles as director of strategic planning, corporate development at Newmont in Denver and senior market analyst/trader at Phelps Dodge in Phoenix. Mazumdar worked in technical roles for IAMGold in Ecuador, North Minerals in Argentina/Chile and Peru, RTZ Mining and Exploration in Argentina and MIM Exploration and Mining in Queensland, Australia, among others. Mazumdar has a Bachelor of Science in geology from the University of Alberta, a Master of Science in geology and mining from James Cook University and a Master of Science in mineral economics from the Colorado School of Mines.
The Gold Report: A strange thing happened over the last few months. The price of gold went down, but some of the junior mining equities are up. Can you explain what is going on?
Joe Mazumdar: Year-to-date gold is flat. But the Market Vectors Junior Gold Miners ETF is up 13%. Investors prefer owning the equity now rather than owning gold. This was not the case a couple of years ago when gold was going up to $1,900 an ounce ($1,900/oz) and far outperforming equities. Part of the reason was investors didn't believe gold could maintain that level, which suggests that equities were overvalued at the time. Now the overall thesis is that gold has bottomed and the equities are undervalued. We don't believe all mining equities are undervalued, but there are some with management teams that can deliver the goods, whether it's in exploration, development or production, and are seeing a premium for their projects that make sense.
The limited amount of capital in the sector is going to companies that can "tick all the boxes." This is leading to kurtosis in the distribution of financing opportunities. The majority of companies don't have any means of attracting financing, while others are attracting more than they asked for.