2'000 Mai 07 Nov 07 Mai 08 Nov 08 Mai 09 Nov 09 Mai 10

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Janis Ramsey
6 years ago
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1 PRECIOUS CAPITAL GLOBAL MINING & METALS FUND GRI Conference, November 2010

2 Investment Rationale Money printing will lead to ongoing paper currency depreciation Demand for gold as a reserve currency will increase Demand will overwhelm supply causing the gold price to rise Objective: Outperform gold and other precious metals in a rising precious metals environment Strategy: Invest in gold equities leveraged to the gold price with a limited use of derivative positions Time frame: 3 to 5 years 2

3 Precious Capital Ltd. The Fund Manager Turnaround and new management team in December 2008 Regulated by the Swiss Financial Market Supervisory Authority (FINMA) Board of Directors Prof. Dr. Vito Roberto Chairman Dr. Andrew Michaels Steve Triantafilidis Florian Siegfried Management Florian Siegfried CEO Patrick Michaels Managing Director - Professor at the Law Faculty of the University of St. Gallen, Switzerland - Attorney at Law with Baker & McKenzie, Zurich - Chairman and founder of Zuri-Invest Ltd., Zurich and Asty Capital Ltd., Zurich - 40 years of international experience in mining financings and mergers - Head of Global Equities, Vontobel Asset Management Ltd., Zurich - Formerly Global Head of Equities for Swiss Re Asset Management, Zurich - Formerly CEO of Shape Capital, a listed investment company founded by Bank Julius Bär - Formerly with Louis Dreyfus/Klaus Jacobs affiliate companies (see above) - Background in law and economics, post graduate courses at the Colorado School of Mines, Golden, Colorado, U.S. - Director of Romarco Minerals (R.V) in Canada 3

4 QE2 and Gold FED s QE2 bond buying programs concentrate on intermediate maturities in the range of 5 to 10 years DVO1 concept (dollar value of 1 basis point): bond prices are more sensitive to rising interest rates in a low interest rate environment; bonds with intermediate maturities are more sensitive than bonds with short-term maturities FED is taking unprecedented credit and market risk on its balance sheet: capital = $ 57 bio; current assets = $ 2.3 trillion + QE2 = $ 3 trillion With a 2% drop in the average value of the assets the FED is technically bankrupt Who will buy from the FED? Exit would require the FED to apply market to market valuation which could wipe out its capital entirely With the FED s dominant role in buying treasuries the market liquidity will decrease QE2 is transferring liquidity from treasuries into gold 4

5 Credit Deflation and Gold Liquidity supports the Gold Price Credit deflation in the US started in May 2007 with the failure of Bear Stearns Commercial banks do not lend and build-up excess reserves with the FED Ongoing liquidity drain for central bank reserve collaterals Consequence: Liquidity is moving into gold? 7'000 6'000 5'000 Failure of Bear Stearns Failure of Lehman 4'000 3'000 2'000 Mai 07 Nov 07 Mai 08 Nov 08 Mai 09 Nov 09 Mai 10 Total Consumer Credit Outstanding (bio $) Monetary Base (adj.) 5

6 Investment Framework Independence Transparency Performance Liquidity Capital preservation 6

7 Investment Concept Investing in mining equities globally Constant review of equity universe, focusing on intermediate companies Selective investments in early stage situations through private placements and pre-ipos Concentrate on underlying metals with the best potential for long-term real price appreciation Generally equity long only with the possibility of hedging (options, shorts) Variable cash position and some trading in the senior stocks Use technical indicators to anticipate important market shifts 7

8 Our Track Record 1 Jan 2009 until 5 Nov Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep AuM CHF mio. (r.s.) Fund XAU Index* (CHF adj.) * XAU Index: Philadelphia Gold and Silver Sector Equity Index since YTD last 3 months 1 last 6 months 1 last 9 months 1 last 12 months 1 Fund 131.8% 41.5% 30.2% 21.3% 45.5% 60.5% XAU (CHF) 55.5% 17.9% 14.6% 4.9% 30.2% 26.3% 1 as from 31 October

Creating Value by Investing along the Mining Life Cycle The main value creation is in exploration (highest risk) > Access to quality deals and indepth due diligence is the key Revaluation by shifting

9 Creating Value by Investing along the Mining Life Cycle The main value creation is in exploration (highest risk) > Access to quality deals and indepth due diligence is the key Revaluation by shifting from exploration to development status (medium risk) > Selection of low execution risk development situations Revaluation by shifting from development to producer status (least risk) : > Evaluation of undervalued producers with exploration potential 9

10 Some Investment Considerations Invest in companies with low discovery costs per ounce and proven discovery success Focus on companies which have grown resources and reserves through successful drilling rather than just increasing the cut-off grade Producers with sensitive project financing covenants are less flexible and pose an increasing financial risk High cost producers may offer attractive leverage to the gold price in the current environment Preference for pure unhedged precious metals producers with limited base metal by-product credits 10

11 Focus on Companies with strong Balance Sheets Intermediate companies Equity ratio % Equity ratio 60-80% 36.7% 43.3% With the GFC the intermediate and mid-sized space had drastically reduced its financial leverage Equity ratio 40-60% 13.3% Equity ratio 20-40% 6.7% % of Portfolio Companies Seniors Source: latest available financial reports as per 31 August

12 Average unrealised Returns by Portfolio Segment 31 Dec 2008 until 5 Nov 2010, in local currencies, excluding pre-ipos (valued at cost) 126.6% 86.8% 54.7% 58.5% 37.5% Tier 1 producers Tier 2 producers Tier 3 producers Developers Explorers 12

13 Top 10 Positions (as of 5 November 2010) Company Category Transaction Initial date Place of operations CCY Ø Cost Price Actual Price Return % Timmins Gold Tier 3 producers private placement May 09 Mexico CAD % Orezone Gold Explorers open market Feb 10 Burkina Faso CAD % Anatolia Minerals Development CGA Mining Developers open market Oct 09 Turkey CAD % Tier 3 producers open market / financing Jan 09 Philippines CAD % Kirkland Lake Gold Tier 3 producers open market Jan 10 Ontario CAD % Allied Gold Tier 3 producers financing Dec 09 Solomon Islands, Papua New Guinea CAD % Alexco Resources Developers open market Jan 10 Yukon CAD % SAS St. Andrew Goldfields Tier 3 producers private placement Aug 10 Ontario CAD % Romarco Minerals Explorers open market Mar 09 South Carolina CAD % Lakeshore Gold Tier 3 producers open market Apr 10 Ontario, Mexico CAD % 13

14 Portfolio Allocation as per 5 November 2010 Currencies Metals Companies 3% 5% 5% 12% 11% 1% 5% 18% 4% 5% 75% 83% 30% 43% CHF USD CAD GBP AUD (Currently no FX-hedging) Gold Silver Copper Other Tier 1 producers Tier 3 producers Developers Tier 2 producers Explorers 14

15 Short-term Outlook Downside capitulation of the Dollar-Index (DX) in October to a level of 75.8 Reversal of the DX could set an upside trend above a level of 78.5 This could limit the move in commodities: weekly RSI on the CRB reached 71 in October which is the highest level since the cyclical high of 82 in 2008 October Springboard rally in the XAU was phenomenal (RSI of 89) and an intermediate correction may follow with a rising DX; silver likely to underperform gold Generalists will buy the senior gold space in Q based on rising dividends Therefore, senior producers may outperform the intermediate space in the short-term Correction phases in the XAU may be moderate as the real gold price continues to rise Pull backs in gold stocks will be used by institutional investors to reposition in the sector 15

16 Long-term Outlook Ongoing rise in gold s purchasing power in the next few years Substantial profitability improvements within the whole gold mining sector Gold and silver mining market still highly fragmented, consolidation will continue Intermediate precious metal producers and exploration companies are in the spotlight Strategy Identify and invest in undervalued equities Build positions through private placements, trading and pre-ipos Maintain a liquid portfolio with a target volatility of < 40% Use technical indicators to anticipate important market shifts 16

17 Fund Characteristics Fund domicile: Fund class: Fund currency: Switzerland Equity fund CHF Valoren number CHF: ISIN number CHF: CH Bloomberg CHF: LBSPRCS SW Valoren number USD: ISIN number USD: CH Bloomberg USD: LBSPRCU SW Daily price information: preciouscap.com, bloomberg.com, fundinfo.com, swissfunddata.ch Management fee: 1.5% p.a. Performance Fee: 15% over 5% hurdle rate and high watermark Trading: Daily Asset manager: Precious Capital Ltd., Zurich / Florian Siegfried & Patrick Michaels Fund administrator: LB(Swiss) Investment Ltd. Zurich Custodian: Liechtensteinische Landesbank (Switzerland) Ltd., Zurich (group rating: AAA) Auditor: PriceWaterhouseCoopers, Zurich 17

18 Contacts Precious Capital AG Bärengasse Zurich Switzerland Tel Fax Florian Siegfried, CEO

Factsheet Reichmuth Matterhorn+ USD December 2016

Factsheet Reichmuth Matterhorn+ USD December Indexed performance (net of fees) 1 400 20% 1 300 11.0% 11.0% 15% 1 200 8.2% 6.5% 10% 1 100 5% 1.0% 1.3% 4.4% 1 000 0% 900 5% 2010 2011 2012 2013 2014 2015