Chris Beer has made the RBC Global Precious Metals Fund the best-performing Canada-focused mutual fund by scooping up smaller, growth-oriented gold companies. He thinks energy and metals are now the better play.
"Oil has $60 written over by the end of the year," Mr. Beer said Tuesday in an interview at Bloomberg's Toronto office. "We can see the fundamental drivers there, similarly in zinc and to a lesser extent in copper."
Mr. Beer co-manages about $1.6-billion in six funds with Brahm Spilfogel, including the $855-million precious metals fund, according to data compiled by Bloomberg. The precious metals fund returned 32 per cent over the past 12 months, beating 112 other mutual funds with assets of at least $750-million, the data show. Mr. Beer has also outperformed the metal which is down about 4.2 per cent over that timeframe to about $1209 an ounce in New York.
While gold may have seen its lows, Mr. Beer expects the price to remain range-bound until the market digests some of the U.S. rate increases, which are fuelling a rally in the U.S. dollar. Among gold companies, he's favouring Monaco-based Endeavour Mining Corp., which has returned about 110 per cent over the past 12 months.
Mr. Beer, who joined RBC Global Asset Management 17 years ago and holds a geology degree, looks for upside in terms of net asset valuation. He pointed to Melbourne-based OceanaGold Corp., a mining and exploration with projects in New Zealand and the Philippines" and Toronto-based Torex Gold Resources Inc. as examples of stocks that show potential for a rise in their net asset values.
OceanaGold could trade close to seven times its cash flow multiples "if the Philippines political discount alleviates a bit," he said. The company currently trades at about 5.9 times, according to analyst estimates. Torex can add to its mine plan from nearby deposits, Mr. Beer said.
Among metal companies, he calls Vancouver-based Teck Resources Ltd. a "great company," with zinc exposure, followed by HudBay Minerals Inc. Mr. Beer also likes Arizona Mining Inc., which is a couple of years away from permitting its zinc project in the state. "With the Trump administration arguably making things easier to permit in United States, Arizona Mining looks like an interesting project."
He also likes Ivanhoe Mines Ltd. as Chairman and Co-Founder Robert Friedland "has assembled three of the best undeveloped project in the world." One of Ivanhoe's projects, Kipushi, is basically 18 months away from first zinc production, Mr. Beer said.
Among base-metals miners, "there is not many places to go for growth" other than First Quantum Minerals Ltd., Mr. Beer said.
Teck Resources, BHP Billiton Ltd. and Rio Tinto Group are trading at a free cash-flow yield of 13 per cent to 15 per cent this year alone. "In two to three years' time, investors could get 30 per cent of the market cap as cash flow, which is attractive," mR. Beer said.
As for oil, crude slumped the most in more than a year as data showed U.S. stockpiles at a record. West Texas Intermediate for April delivery fell $2.86, or 5.4 per cent, to settle at $50.28 a barrel on the New York Mercantile Exchange, the lowest close since Dec. 7.