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lower transaction cost, you can buy it in
certificated form. We, of course, prefer the
Sprott Physical Gold Trust.
The next thing to do is buy shares of
some of the senior producers – the best
of the best. Do your own due diligence.
Of course, if you need help, call Sprott.
Increasing gold prices will benefit, in an
economic sense, the senior produces best
because they are the ones that will enjoy
the margin expansion.
When you have taken care of invest-
ing, then you can begin to speculate.
Speculation is where the big money is
made; however, that is where the big risks
are. In my view, the people who are your
average, if you will, gold speculators, need
to develop a list of stocks they have stud-
ied correctly. I like to tell people that they
should own as many stocks that they are
willing to spend hour a month per stock
monitoring them. Know your companies
and outpace your competition and you
will do very well in this bull market.
RW: ETFs are an interesting way to
invest. What does the Sprott Gold Miners
ETF hold?
RR: The Sprott Gold Miners ETF is a
factors-based rather than a market cap-
based ETF. We took the point of view that
mere size was not the right way to look
at gold mining companies because too
often the very large companies were hav-
ing trouble maintaining their reserves and
resources. If you believe that the gold price
will rise over three or four years, you don't
want to be stuck in companies whose gold
production is declining. So, rather than
looking at size, we look at companies that
have increasing revenues, good margins
and have good cash flow to debt service.
We also look at companies that historically
produce good news compared to the gold
price.
We are over-weighted in high qual-
ity names such as Goldcorp, Randgold
and Franco-Nevada. In other words, high
quality companies with high margins and
growing revenues. We are not buying size
– we are buying performance.
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