The following criteria outline the fund’s view of an ideal gold mining investment. Compromises usually have to be made, but at least two thirds of the fund’s portfolio will be based on shares which meet the majority of the criteria listed below:
- The resource to be in a reasonably safe political area. For example, no investments will be made in companies with a significant proportion of their operations in Russia, former Soviet Union states and countries like Venezuela.
- No serious environmental problems.
- An experienced CEO and expert management team.
- A strong balance sheet, preferably with no debt and no major future capital liabilities.
- Future production to be unhedged.
- Strong cash flow on a PCF multiple below the average of the company’s peer group.
- Increasing production with a reasonably long life.
- The cost per ounce of gold produced (or to be produced) to provide some comfort in the event of a downturn in the price of gold.
- The resource to be very prospective – open to further discoveries in all directions including depth.