A Strategic View For Gold Investors

How you can take back control of your future by diversifying into market beating commodities…

by Simon Popple of Brookville Capital

A Strategic Review For Gold Investors
How you can take back control of your future by diversifying
into market beating commodities

By Simon J. Popple

“The time to repair the roof is when
the sun is shining”
– John F. Kennedy

You’re smart.
You’ve had a successful career.
Some year’s you’ve picked up a bonus and paid off some debt or bought something
nice. Perhaps corrected a bad investment.
But you’ve got an eye on the future. You want it to be better than your past. It’s
natural. What’s the point in having a brand new Porsche now if you end up having
to drive a knackered old Audi in a few year’s time. I know. I’ve done it. It’s not very
nice. Back then the future seemed a long way away. But time moves fast.
Each month I’d pay something into my pension plan, which I didn’t really care about.
I’d always see it when I scanned my payslip, but never paid any attention. I’m now
52 and my pension pot has become very relevant.
At some point I’m going to have to rely on it. Literally, until I die.
Father time tells us when to retire. Something you can’t control. When your time
comes and you shuffle out the door with all your belongings, hopefully after a nice
send off, there are two things to think about.
Do I have enough money?
Can I maintain my purchasing power?
To enjoy your retirement, you need to be able to say YES to BOTH these
questions.
You may have enough, but what happens if we get rampant inflation that
destroys your purchasing power? Similarly, you may have protected your
purchasing power, but do you have enough money?
Like me, you’ve probably looked into index linked savings. They may help, they
may not. It really depends on whether their definition of inflation is the same as
yours. The two could be very different.
For example, National Savings & Investment Certificates have recently moved
from the Retail Price Index to the Consumer Price Index – which tends to be
lower. Take a look at their website. If I was retiring now this would genuinely
scare me. I’ve got no idea if my personal inflation in 5 years will bear any
resemblance to the CPI. Do you?
I’ve also looked at annuities. Here is a chart that shows annuity rates for the last
13 years to January 2020. This basically says that for every £100,000 a 65 year
old has invested in an annuity, they should be able to receive £5,032 per annum.
Which is £419 per month. About £100 per week.
Can you spot a trend?

By the time I retire it could be even less. I want to do something about it now.
While I still can.
What about you?

What do investors typically do?
When approaching retirement they tend to switch most, if not all of their savings
from equities to fixed income. I’m not saying you should not do that. But given
the huge pile of debt across the globe (as well as negative interest rates), I don’t
think it makes much sense to have all your eggs in one basket.
If the debt markets collapsed and there were huge defaults, where would this
leave you?
What would you live on? If you think the state will come to your rescue, they
might, but in the UK the state pension increases in April 2020 to £175.20 per
week.
Could you live on that?
I want to help you do something before the problems arise.
Prevention is better than the cure and all that.

Some of you may be thinking about extending your working life, which is fine if
you’ve got a job and are in good health, but can you guarantee that?
If anything were to happen to you, what kind of income would your dependents
be left with? Would they be able to live on it? Will this enable you to leave a
legacy?
Appreciate that when times are good, the equities market could well deliver, but
have you protected yourself for a downturn? Surely it makes sense to set yourself
up for different outcomes. Diversify a little.
If you don’t diversify you’ll probably spend most of your hard-earned retirement
glued to a computer screen. Delighted when things are going well, but very
worried when they’re not.
What would you do if you lost a lot of money in the markets? How would you get
it back? You’ve retired. Those bonus days are over.
Wouldn’t it be nicer to reduce this stress?
In this paper I want to give you a few ideas that you can put into action, to not
only reduce this stress, but hopefully enable you to retire earlier.
As I said, to do that you really need to do two things.
Firstly, try to ensure that you’ve got enough to retire with and secondly, try and
protect your purchasing power.

How do I do that?
Right now, I bet you’ve got literally no exposure to gold.
I think this is a mistake. A big mistake.
I’m not a gold bug. You shouldn’t be fully exposed to the yellow metal, but I
don’t think it’s ridiculous to have at least 1% of your investments in gold.
In this paper, I want to tell you a bit about gold and explain why I think you
should have at least some in your portfolio.

Where does gold come from?
It’s not what you think!
Gold is not formed on the Earth like diamonds and many other gems and
minerals.
In fact, most scientists believe that gold came to earth from outer space – in large
meteorites that struck the planet millions of years ago.
By studying ancient rock samples with high-precision instruments, scientists have
found evidence that accessible gold (that being mined), arrived via asteroids
when the earth was still fairly young.
Here’s another interesting fact: During the initial formation of the planet, heavy
iron sank into the middle to form the planet’s core, taking other heavy elements,
like gold, with it. That’s where most of the gold on the planet should be, rather
than in the crust, which is where we tend to find it.
Just think about that for a minute.
It arrived from outer space, millions of years ago and (at the time of writing this
report) you can buy it for around $1,650 per ounce. Not bad.

Not only is it rare, but it’s becoming increasingly difficult to find. There are fewer
and fewer major gold discoveries and exploration spending has been falling off
a cliff. Which is probably one very good reason why there’s been a lot of M&A
activity in the sector.
If gold production is peaking and the mining companies aren’t exploring like they
used to, then where is the new supply going to come from? You can’t print it.

How did gold perform in some market downturns?
Let’s start off with a quick history lesson… this is how gold has performed during
financial crises vs the S&P 500 (the US stock market) index:
1976 – 1978:
The S&P 500 fell 19% Gold climbed 53%
2000 – 2002:
The S&P 500 fell 49% Gold climbed 12%
2007—2009:
The S&P 500 fell 56% Gold climbed 25%
Why did gold rise when other assets were falling?
Because it’s viewed as a safe haven asset.

How Much Gold Is There?
Gold is still very difficult to find. Although there have been some advances in
exploration – for example, the use of drones, several experts believe we have
reached peak gold. They’re expecting production to go down rather than up.

According to Reuters there are about 171,300 tonnes of gold in the World. To
provide a bit of perspective on this. If that was formed into a single gold cube it
wouldn’t quite cover a tennis court.
Gold is currently being mined at about 3,500 tonnes a year, so the above ground
supply is expanding at about 2% per annum.
Of course, there is gold waiting to be mined and Bullion Vault estimate the
World’s reserves to be about 50,000 tonnes. So if you add that to the gold that’s
already been mined you come to 221,300 tonnes of gold – above and below
ground.

How is Gold used?
Over 95% of the world’s gold is held as a store of wealth.
Typically, as coins, bullion bars or jewelry (particularly in India, the world’s largest
consumer of gold). Although a small amount is used in dentistry and electronics,
this accounts for a very small proportion of demand, so I would not really classify
it as an industrial metal.
Gold and for that matter silver have been around for thousands of years. Whilst
silver has many industrial applications (about 55% of demand comes from
industry), gold doesn’t. When industry is booming, there’s therefore limited use
for gold, but when it’s not, it can do very well – I’ll touch on this later.

Ok I hear you say, how does this help me?
Having at least some gold in your portfolio may be able to help both protect your
purchasing power and make you some money.
Here are just two reasons.
I cover more in The Brookville Capital Intelligence Report.
Firstly, gold’s limited supply (relative to money printing) causes it to be a much
more reliable store of purchasing power than currency.

Let’s revisit that 2% figure – the rate at which gold supply is growing.
Now let’s compare that with the expansion of the money supply.
As the US dollar is the reserve currency, I think we should look at this. Their M2
money supply is currently growing at 7%.
Money Supply is the total quantity of money in circulation at a point in time. M2
includes quite a broad set of financial assets held principally by households. M2
consists of M1 plus: (1) savings deposits (which include money market deposit
accounts, or MMDAs); (2) small-denomination time deposits (time deposits in
amounts of less than $100,000); and (3) balances in retail money market mutual
funds (MMMFs).
Loose monetary policies (such as Quantitative Easing) mean that currencies are
devaluing against gold.
I’m not sure what currency most of your savings are in, but take a look at the
chart below that I got from the World Gold Council:

As you can see, across the board, currencies have been devaluing against gold.

What about inflation and for that matter, deflation?
Here are some quotes from a recent report from the World Gold Council (12th
February 2020): ”Gold is long considered a hedge against inflation and the
data confirms this. The average annual return of 12% over the past 49 years, has
outpaced the UK consumer price index (CPI).”
“Gold also protects investors against extreme inflation.
In years when inflation was higher than 3%, gold’s price increased 13% on
average.”
“Over the long-term, therefore, gold has not just preserved capital but helped it
grow.”
“Research by Oxford Economics shows that gold should do well in periods
of deflation. Such periods are characterised by low interest rates, reduced
consumption and investment, and financial stress, all of which tend to foster
demand for gold.”
I’m not suggesting you put all your capital into gold, but surely it makes sense to
have at least some exposure?
In a nutshell, having some gold in your portfolio will provide you with a more
diverse asset base and could help protect your purchasing power.

But I also want to make some money!
Bear with me!
It may now be a particularly good time to get some exposure to gold. It’s all about
timing. If you own gold at the right time you will own a fast appreciating asset
when normal business assets, and money itself, are tumbling in value.
Owning gold in a good phase has proven to be very profitable.
In the 5 years after the 1929 crash gold’s investment purchasing power rose 17
times. In the decade of the 1970s gold’s investment purchasing power rose 15
times (Source: Bullion Vault)

Set out below is a chart that compares the 1970’s bull market to the one we’re
now in. As you can see, if history was to repeat itself, there could still be a lot of
upside to the gold price. Look at where the red line is now

How does the Brookville Capital Intelligence Report help?
There are many ways you can get involved in the gold market, but you need to
understand what you’re doing. I’m here to help, which is why I’d suggest you take
a look at my report.
I’ve been investing in the market for many years and have learnt a lot. I want to
share this knowledge with you.

To make the Report work for you we need three ingredients. I call it the 3 R’s
system. Firstly, you need some capital to deploy as well as time to read the report
– that’s your part. I then provide the research and the risk management tools as
well as the support – to help you make the right decisions for you.

I’ve been involved in this market for many years. I’m used as a gold expert by IG
Index, Proactive Investors and Silver Doctors.
If you’d like to see just some of the interviews please click on this link to take a
look:

CLICK HERE

Over the years I’ve looked at 100’s probably 1000’s of mining companies and this
report distills all this down to what I would view as my “best of the best”. There
are about 20 open positions in the core portfolio which includes some shares I
like for their dividends. A regular income from gold and silver has a lot of appeal
for me.
I must confess, it’s trial and error which has got me here, but now I’ve got a great
portfolio. And I want to share it with you.
Each of the companies in the portfolio is carefully analysed using my B.R.I.D.G.E.
system, which stands for Balance sheet, Resources, Infrastructure, Diversity,
Grade and Exploration Potential. If I like what I see it makes the squad. I call it a
squad because it’s based on a Fantasy Football format.
I use this to explain the risk of each opportunity. For example, physical gold and
silver would be my stadium, goalkeepers are very large companies, defenders
would be large companies with midfielders being “mid-caps” and forwards my
“small caps”.
You decide whether or not it’s for you. You’re in control. But I’m there to help.
We’ve got a good track record and some nice testimonials, perhaps you want to
take a look at these?
Here is a link:

CLICK HERE

What will I do for you?
I work for you.
Each of my clients is different and incredibly important. You’ve worked hard to
get where you are, so helping you with a very small proportion of your wealth is
something I take very seriously.
We’ll kick off with a clarity call where we’ll discuss what you want, I can give you
an overview of the market and we’ll discuss your appetite for risk. This is a free
call where we just get to know each other. At the end of it we may decide to go
our separate ways, or work together.
In the past, some of my recommendations have made investors 5 times, 10 times
and in one case, over 38 times their money. But they are more speculative stocks
– not for everyone. It may be that the lower risk opportunities are more suitable
for you. Which is why I need to understand a bit about you.
My Father is 79, I would not want him in anything other than the Stadiums and
Goalkeepers. I want him to enjoy his life and not worry about the markets. That
may resonate with you, or perhaps you like to take on more risk.
This is not just about investing in gold. It’s also vital to have a strategy. Imagine
playing football without a goal? You must know why you’re doing what you’re
doing. I’ll help you devise your strategy and stick to it.

For example, income is important to me, so there are some stocks in my portfolio
that are there to do just that – pay me dividends. That’s not to say I don’t care
about the share price, I do. But even if it reaches my target for each position, I
may not sell – because I want to keep the income.

About me
After completing my MBA at Birmingham University in 1993, I joined the
Corporate Finance team at Singer & Friedlander, working on small and midcap mergers and acquisitions. In 1997 I joined the Senior Banker team at ABN
AMRO before moving into their Corporate Finance department in 1999, where I
specialised in private equity.
I then became Head of Investment Management at Strutt & Parker’s Real Estate
Financial Services before becoming a Director of Topland, one of Europe’s
largest private investment companies. In 2008, I set up Brookville Capital, initially
this was a capital-raising business, but after several successful investments in gold
and silver mining companies – I decided to focus on these.
Following these successful investments I started a newsletter with Moneyweek
called Metals & Miners and when they were acquired, I set up Gold Speculator
with Jim Rickards. During this time I’ve spoken at Moneyweek and Mines &
Money conferences as well as done numerous interviews with IG Index on the
gold market.
With my Australian business partner, I still help Junior Mining companies who
are seeking capital, so I’m heavily involved with the mining community on a
daily basis – enabling me to work with many exciting companies that are not well
known to the investment community.

Conclusion
By having at least some exposure to gold and silver – right now, I bet you’ve got
none – you don’t have all your eggs in one basket.
If there’s a major correction or even a collapse in the equity or debt markets,
because you’ve diversified your investments, you’ll hopefully be less stressed.
Gold should help you protect some of your money as well as increase in value if
there’s another downturn. If you’ve invested wisely, you could even bring your
retirement date forward, potentially by a lot.
But the main reason I want you to have at least some exposure is to reduce
stress. If someone offered me a way to reduce my stress levels I’d take it.
Would you do the same?
In these uncertain times there are certain things you can do to make your life a
little easier. If you want to take the next step, I reserve 5 slots a week in my diary
for Clarity Calls – please click on this link to book yours.

Please Note:

This analysis is published to inform your thinking, not lead it.
Previous price trends are no guarantee of future performance. Before investing in
any asset, you should seek financial advice if unsure about its suitability to your
personal circumstances.

Bonus – Sample report
I put Chalice up on the website as a “Freebie” in February 2019 when it was 12.5
cents. I then wrote to subscribers about it a few weeks later, when it was 15.5
cents. As I write this report it’s now at 25 cents (having been as high as 33 cents).
Take a look. See if it’s for you.

The Brookville Capital Intelligence Report
Edition Number 3
15th March 2019
Dear Subscriber,
I must confess that I’ve swapped things around!
I was going to write up Chalice next week, but given we could have some
news literally any day now, I wanted to get this out to you as soon as possible.
You’ll understand why when you read it.
As you know, I put Chalice Gold up as my “Try before you buy” on my
website when the price was 12.5 cents. Even though the price has crawled
up to 15.5 cents. There’s been no news….yet.
But as you’re about to see, we could hear something at any time. So it
makes sense to tell you about it sooner rather than later.

What’s the story?
Firstly, let’s deal with their key assets. Because that’s why people are so excited –
including me – it’s my largest investment.
They’ve had three rigs drilling large scale greenfield projects and we’re now
waiting for results.
But these are no ordinary greenfield projects, because they are exploring in
relatively close proximity to some huge finds by other players. Not only that, but
with A$21.3m in cash (as at 31st Dec 2018) – which compares with a market value
of A$41.3m, they should have plenty of firepower to carry out further exploration
if they find anything.
As important is there track record of returning cash to shareholders rather than
burning through it on other projects. In fact, since 2012 they have returned
A$36m to shareholders. Quite a lot for a small company like this.

Where are they exploring?
They are exploring two particularly highly prospective greenfield projects –
Pyramid Hill in Australia and the East Cadillac gold project in Canada.
What’s particularly exciting about these projects are that they are located in very
good mining districts. More importantly, if they find what they are looking for
(large deposits) – they will be bucking a declining trend of gold discoveries –
particularly in Australia, where there have been no major greenfield discoveries
(which are considered to be a discovery with a net present value of over US$1bn)
for at least 10 years.
Take a look at the chart below….

Here is a quote from MinEx Consulting, Nov 2018
“Peaks in discoveries precede the peaks in exploration spend. So the best time
to get in [to explorers], is when exploration bottoms out and starts rising…..which
is now!”
Let me tell you about each project
Pyramid Hill
As you can see, they’ve got several projects in Australia, but Pyramid Hill is the
one everyone is most excited about.

Pyramid Hill is located in the Bendigo Zone of Victoria, an area that has produced
over 60 million ounces of high-grade gold. The general consensus is that the
geology extends to the north – which as you can see from the diagram below –
is where Chalice have a major land holding. In fact, they own about 60% of the
7,000km2 prospective area. Chalice have about 4,500km2 of claims in the dark
green area below:

Recent high-grade finds at both Fosterville and Catalyst have got tongues
wagging and explorers very excited that there could be a very large deposit out
there….waiting to be discovered.
Fosterville currently has a mineral reserve of 2.7 million ounces at an incredibly
high grade of 31.0 g/t. This exceptionally high-grade means that their operating
cash costs are extremely low – coming in at around US$180 per ounce (to provide
some perspective on this, the top quartile (i.e. the best quartile) of costs in
Australia is US$600 per ounce. Similarly, Northern Star, one of the darlings of the
Australian gold mining industry (look at their share price over the last 5 years) has
a 6.3g/t reserve at their highest-grade underground deposit – their joint venture
at East Kundana.

The reserve grade at Fosterville is exceptionally high – meaning it should be
extremely profitable for their owners – Kirkland Lake.
Chalice started a 15,000m drill program last year (testing three large-scale target
areas North West of Bendigo) and the results could be out any day now (see the
timetable I’ve set out at the end of this edition).
Although it’s impossible to predict what good results could mean for the
company, if you take a look at Catalyst Metals (ASX:CYL) who own 50% of two
projects in the area – you will see that their share price has moved dramatically
over the past three years. Clearly this is on the back of some great discoveries
– but given there’s a chance that Chalice could get similar results – if you are a
speculator – you may want to take a look.
But that’s only part of the story!
Because they’ve also already spent CAD$12m at the East Cadillac Gold project in
Canada….which is also in a highly prospective area.

East Cadillac Gold Project
East Cadillac is located in the prolific Abitibi greenstone belt in Canada with a
known gold endowment of over 210 million ounces. Which is huge.

This could actually be even more exciting than Pyramid Hill, because they’ve
already spent CAD $12m on exploration. So they should already have a much
better idea as to what they are looking for.
I hear that they have now completed the two rig 8,100m drilling programme –
which was designed to test two large-scale targets: the Anderson and Legrand.
Assay results are expected in early April – only weeks away.
Chalice controls over 27km of strike along the Larder Lake (Cadillac Fault) – which
is the most prolific gold trend in Southern Abitibi. Since 2016 they have executed
14 earn-in/purchase agreements which has enabled them to control 80 – 100% of
this area. If they find anything, they’ll own a large proportion of it – potentially all.

Here is a map showing where their project is relative to the projects in the area
East Cadillac is the red star.

Summary
What I really like about this opportunity is not only that there is fantastic
potential, but they also have a track record of finding good projects, selling them
and returning capital to shareholders.
Management are clearly important, especially for smaller companies like this.
The Managing Director is Alex Dorsch, who was formerly with McKinsey, the
consultants. Although he’s not the largest shareholder, he seems to be a wise
head on relatively young shoulders and well respected in the mining community.
I feel confident that they’ve got the right man running the show.

He’s relatively new to the company (he joined in late 2017), so it’s worth taking a
look at what they’ve done prior to his appointment. Here is a timeline since they
were listed on the ASX in 2006. As you can see, they’ve got a good track record
of buying assets, finding something and then selling them on at a decent profit.

Given the market value is currently A$41.3m and as at 31st December they had
A$21.3m in cash – the market does not seem to be giving them much value for
the potential of these projects. Clearly time will tell when they announce the
results. But the current share price could turn out to be incredibly cheap. Which
is why it might make sense for you to take a closer look at this one with your
financial adviser.
Here is a summary of their current exploration program. Clearly there could be a
lot of news over the next few months.

Important Information
Should you be in interested in investing in any ideas presented by the Brookville
Capital Intelligence Report you should seek independent financial advice before
buying or selling any shares. Your capital is at risk when you invest in shares –
you can lose some or all of your money, so never risk more than you can afford
to lose. The ideas put forward by Brookville Capital Intelligence Report may be
small company shares. These can be relatively illiquid, which means they can
sometimes be hard to trade and there can be a large bid/offer spread. If you
need to sell soon after you’ve bought, you might get less back than you paid,
making them riskier than other investments. The ideas that are made are also
traded in a foreign currency and are subject to currency risk, meaning that you
may lose money even if the price of the share rises. Any dividends paid will be
taxed at source in the country of issue. Always seek personal advice if you are
unsure about the suitability of any investment.
Profits from share dealing are a form of income and subject to taxation. Tax
treatment depends on individual circumstances and may be subject to change in
the future.

 

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