TGR: Is South Africa a good place to be doing business?

BK: I think so. South Africa just had elections. They elected Jacob Zuma, which everybody expected. I don’t anticipate any bad political things coming out of South Africa. It’s a very, very difficult country in transition in its post-apartheid years, but it’s not going to turn into Zimbabwe. I’ve been there, and I’ve met African National Congress people. I’ve talked to the business community there. I am very comfortable investing in South Africa—as long as you understand what you’re getting.

Another great company that’s also in Africa but also elsewhere in the world is IAMGOLD Corporation, a very well-managed company with a great future ahead of it. And if you’re just looking for big names, Barrick Gold Corporation is the world’s biggest gold mining company.

They’re well capitalized and have lots of reserves. Every year they mine a bunch of gold and have to go out and get some more. So they mine, they operate, they produce, they make money, and then they go out and buy other operations. A good company going forward.

So there are three ideas if you’re looking for the big guys.

TGR: You mentioned that Anglo is an undervalued play. What about IAM and Barrick?

BK: Barrick is about the right price. You’re not going to get some 40% or 60% appreciation, but it’s a nice safe play that will grow with the gold market. The other thing about big miners, but especially the medium-size and the smaller miners, is that as the price of gold goes up, the profit margins on every ounce of gold that they mine will increase.

These guys have a very, very tight control over their cost structures. You talk to any well-managed miner, and they can tell you how many dollars per ounce it costs to do everything—how many dollars for the digging, the hauling, the crushing, the processing. They know exactly how much money they’re spending at every step of the process.

So if somebody says that they can produce at a cost of $400 an ounce and gold is selling at $900 an ounce, there’s $500 right there. But if gold goes up to a $1,000 an ounce, all of a sudden your $500 profit per ounce is now $600. That’s a 20% increase in profit right there. Of course, it’s not that simple; nothing is that simple in this world. But that’s the basic math behind it. And a well-managed gold company that has good reserves and good operators, can control its costs and is in a reasonably good political jurisdiction—whether it’s South Africa or Nevada—is a pretty good choice.

TGR: You mentioned Barrick finding more gold reserves via acquisition. Do you see any interesting plays if you want to invest in a junior miner or an explorer for that potential acquisition opportunity?

BK: One of the most interesting speculations is a smallish gold company called Canplats Resources Corp.. It has a gold deposit at Camino Rojo in Mexico. It’s been drilling; working up this prospect, doing all of the geology, all of the engineering, all the estimations—everything they need to come up with a good prospect and can say, “This many ounces of gold are buried in this pile of rock.”

Right next to the Canplats acreage is acreage owned by a Mexican mining giant called Fresnillo PLC. The geology of the Canplats property is very similar to an operating gold mine not too far away that Goldcorp owns, and so Goldcorp also has taken an interest in the Canplats property. And I’ve heard that the good folks at Newmont Mining Corp., another exceedingly large mining company, have sent engineers to get their boots dirty walking around the Canplats property.

So, here is a company with an established claim in a fairly stable jurisdiction that they’ve done a lot of drilling and a lot of basic estimation on. There’s Fresnillo PLC, Newmont and Goldcorp, all of which might get into a bidding contest to see who can make the best deal with Canplats. That’s the kind of thing that could take a dollar stock like Canplats and knock it out of the park—some immense payback on that.

TGR: Are there any other opportunities like Canplats that may have potential multiple bidders on them?

BK: It really isn’t in play, but Gammon Gold Inc. (NYSE:GRS) is a nice producer that might interest a company that just needed to beef up its reserves. Gammon is a well-run company; a producer—unlike Canplats. Gammon is actually a small-to-mid-tier producer at this point, and they’ve got operations; working mineral properties and an exploration pipeline.

It’s the kind of thing where if a big company needs reserves in a hurry, it would take them out. Look at the oil industry, they talk about drilling for oil on Wall Street, where it’s cheaper for one oil company to take over another one and improve its reserve position. So, I’d say right now Canplats and Gammon are two companies to watch in terms of takeovers.

TGR: Are these some of the things you’ll be talking about at Agora’s Symposium in Vancouver in July?

BK: I will. I will be talking about these things—gold, trends for gold; energy and other issues related to that. I will be talking about oil and alternative resources, and whatever people want to talk about. It’s always a great conference and this year is no exception.

This is the 10th anniversary of the event, and the speaker line up looks outstanding . I always seem to get lots of good comments from attendees, so anyone who is interested should really check in with Agora Financial for the details as last year's event was sold out...

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