Torex Gold Resources (TXG.TO)

With this, you expose yourself to certain risks, but you are exposing yourself to a very big system.

He tends not to buy a company that is building a mine, but he bought this one because they were close enough to the end and he didn’t expect any CapX surprises. This has a great little asset, a nice simple operation. A low cost operation which generates very strong margins in this kind of environment.

A new emerging gold producer in Mexico. Trading at 7X cash flow and 1.1X NAV. Those are bottom end of the range multiples, and he expects that to re-rate as they develop their mine, which is ramping up right now.

If looking to get into gold, this is a problem because everything has moved a fair bit. This company just declared commercial production at the ELG mine in Mexico. It is roughly 200,000 ounces at a cost of about $5.35. It goes to 350,000 ounces next year and the costs go down. It is the re-rating that he finds really attractive. Although it was moving up, it was lagging the group. It also did a 1 for 10 consolidation last week, which makes it more institutional. Thinks this could see $35 in one year.

Recently announced a 10 for 1 consolidation. This is simply a way of getting the share price higher than what it was. This is a way of attracting long-term institutional investors.

A new gold producer with a brand-new mine in Mexico. He is impressed that they are ahead of schedule. A nice simple operation and should do about 300,000 ounces this year, so free cash flow positive. Their goal is to be 400,000 ounces next year. Recently added to his holdings.

Have the development asset, Morales in Mexico, which is a big deposit. Ultimately thinks it will trade at a premium. Right now they are in the midst of developing it. Have raised enough capital that they think they can get into production without having to go back to market, which is good. However, there is going to be a long time line between now and how long it will take for that asset to ultimately deliver cash. You probably have a 12-18 months time horizon where he doesn’t expect the share price to do much. This is typically why he avoids the development stage.

Going to have a mine with an enterprise value of about $1 billion when all is said and done. Will be producing about 358,000 ounces of gold and that is a lot of cash flow and earnings that come from that. Good jurisdiction and good location.

Mexico. A difficult environment. Good grade. Does not see them as a takeout candidate because of the cost to build it. Assuming you are positive on gold it is one worth holding.

Good growth profile and an asset that someone will want to own at some point. Construction will probably take 2 years plus. More risk to the downside than upside. Good asset value, management and grade, but not coming to market until 2017.

(Market Call Minute.) Stock has been hammered. Need to finance but assets are so great, he believes it will get financed.

(Top Pick Jun 21/12, Down 7.03%)

Follows it closely. Has someone on site. Market doesn’t care about exploration results. He wants to buy shares after good exploration results when no one cares.

(Top Pick Jun 21/12, Down 7.03%)