Louis James: Gold is Good, but Don't Forget to Diversify

Precious Metals

Louis James still likes gold stocks, but he believes they aren’t the be all and end all — especially in today’s tough markets.

The theme of Louis James’ talk at this week’s Sprott-Stansberry Vancouver Natural Resource Symposium was diversification. Though James, Casey Research’s senior investment strategist, still likes a wide array of gold stocks, he emphasized that they aren’t the be all and end all — especially in today’s tough markets. 
As such, he’s looking to hedge his gold bets with companies focused on base metals, and is even looking to the energy sector for opportunities. Here’s an overview of James’ talk, starting with the gold stocks he still has on his radar:

  • Continental Gold (TSX:CNL) — James is a fan of big, high-grade projects, and for him, Continental Gold’s Buritica project fits the bill. Though it’s located in Colombia, James said the project is a relatively safe part of the country.
  • Dalradian Resources (TSX:DNA— Dalradian’s Curraghinalt project is also big and high grade. It’s situated in Northern Ireland, and according to James the government there has been “bending over backward” to help the company out with it.
  • Dynacor Gold Mines (TSX:DNG) — James described Dynacor as a stock for “nervous Nellies.” The company processes third-party ore in Peru, and due to that business model is able to make money regardless of whether the gold price goes up or down. It’s been particularly successful lately as the Peruvian government cracks down on illegal mining and processing.
  • Integra Gold (TSXV:ICG) —  A “little engine that could,” Integra was originally focused on a small, high-grade gold discovery in Quebec. However, not long ago it was able to buy the mine next door to that discovery out of bankruptcy — it now has, among other things, a fully permitted mill at its disposal.
  • Kaminak Gold (TSXV:KAM) — James is interested in Kaminak and its bulk-tonnage Coffee gold project in the Yukon, and said that the company’s recent metallurgical results are “enormously beneficial.”
  • Kirkland Lake Resources (TSX:KGI,LSE:KGI) — Great management has effected a turnaround at Kirkland, said James. The company holds Canada’s highest-grade mine, and is trading at a big discount.
  • Klondex Mines (TSX:KDX) — Production is taking place at Klondex’s Midas gold mine in Nevada, and permitting is going well at its higher-grade Fire Creek project nearby. James said the company is similar to Kirkland Lake, but lower cost.
  • Pretium Resources (TSX:PVG,NYSE:PVG) — According to James, Pretium is “the cat’s meow.” He believes the only deposit like Pretium’s Brucejack is Lundin Gold’s (TSX:LUG) Fruta del Norte; however, given that Fruta del Norte is located in Ecuador, he’d prefer to take his chances with British Columbia-based Brucejack.
  • Rubicon Minerals (TSX:RMX) — Rubicon is another company with a big, high-grade deposit, and James said it’s just poured its first gold. He believes Rubicon has underpromised so far and will ultimately deliver over the mark.

Base metals bets

As mentioned, the theme of James’ talk was diversification, and while it’s clear he remains a fan of gold stocks, he also has a couple of companies he likes on the base metals side.
One is Reservoir Minerals (TSXV:RMC). The company has projects in both Serbia and Africa, and for James what’s appealing about it is that it has a joint venture agreement on its Serbia-based Timok copper-gold-moly project with Freeport-McMoRan (NYSE:FCX). Freeport has exercised its option to solely fund all exploration work at the project up to the completion of a feasibility study, and is the project’s operator.
James also likes Atico Mining (TSXV:ATY), which he described as a smaller, more volatile version of Reservoir. The company is focused on copper-gold projects in Latin America, and is currently producing at its El Roble mine in Colombia.

And now for something completely different

Finally, James outlined a few companies he’s watching in the energy sector. He first mentioned Enterprise Products Partners, which bills itself as operating an integrated network of natural gas, NGL, crude oil and refined products midstream infrastructure in the US. James likes the company because he believes that it will be able to make money regardless of how gas and oil prices are doing.
James is also interested in uranium at the moment — he commented that while he’s confident in where gold is eventually going to go, he has the most near-term confidence in uranium. Cameco (TSX:CCO,NYSE:CCJ) is of course the go-to stock in the space, but James also mentioned Uranium Energy (NYSEMKT:UEC) as one he’s got an eye on.
On a totally different note, James said he’s looking at American Water Works Company (NYSE:AWK), a water utility in the US. He said that its share price has for the most part moved only up for the last decade, and while it may take another 10 years for it to see a big increase, it’s worth investors’ consideration.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 
Related reading: 
Tips and Stock Picks from Louis James of Casey Research
6 Stock Picks from Louis James of Casey Research
Louis James: If You See Fear in the Future, ‘You Have to be Bullish on Gold’
Louis James: Better Operators ‘Don’t Need Gold to Go Nuts’
Louis James’ Canvest 2015 Stock Picks

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