Mike Fagan's Precious Portfolio: Special Alert No. 15: Tier-1 Portfolio Update

Alert No. 15
April 13, 2021

Special Alert: Tier-1 Portfolio Update

Dear Precious Portfolio subscriber,

In today’s alert, I’ll be providing a brief portfolio update on our Tier-1 (Majors) positions.

• Barrick Gold Corp.: (NYSE: GOLD)(TSX: ABX)
• Wheaton Precious Metals Corp.: (NYSE: WPM)(TSX: WPM)
• Sibanye-Stillwater Ltd.: (NYSE: SBSW)
• Physical Gold-Silver: Coins and/or Bullion

The resource space, as you know, is extremely cyclical. And in order to maximize gains, you need to be able to take advantage of temporary pullbacks, which is exactly what I want you to do for open Barrick Gold positions purchased at the higher end of the recent price range.

Use the recent weakness in the gold space to average down on open Barrick positions.

By purchasing additional Barrick shares at the current US$21 per share range, we can effectively lower our average cost basis to approximately US$24 per share from our original buy-up-to price [September 2020] of US$28.00 per share.

Gold appears to be firming up and building a solid base above US$1,700 an ounce with which to move higher.

Likewise, shares of Barrick Gold have been trending higher in recent trading from the US$19.50 per share level in late-March to currently right around US$21 per share.



You’ll recall — in last month’s issue of Hard Asset Digest — my esteemed guest, Adrian Day, had this to say about the world’s second-largest gold mining company:

“As it happens, I think Barrick Gold (NYSE: GOLD)(TSX: ABX) is just ridiculously inexpensive at the moment. It’s a very well-run company, especially since they merged with Randgold and with Randgold’s Mark Bristow taking over as CEO of Barrick. The company has literally been transformed from $4 billion in debt two years ago to now being cash positive. Their mines are all operating well, and the cost of running the mines has improved. G&A costs have also been slashed, which is important because it was a very bloated company prior to the merger. So in my mind, it’s an incomparably better company than it was just two years ago, and certainly 10 years ago, when the price was almost triple what it is today. So Barrick is a very, very good company.”

And that’s coming from the portfolio manager of the EuroPac Gold Fund, whom you might say… knows just a thing or two about gold and gold mining companies!

I agree with Adrian… and that’s just one of many reasons why I believe averaging down on Barrick Gold makes sense at the current price range. And, as I noted in our 2 March 2021 issue, I have been doing just that.

Our original write-up on Barrick Gold can be accessed here.

Based on a strong balance sheet performance since the Randgold merger — including record free cash flow of US$3.4B for full-year 2020 — Barrick has increased its quarterly dividend by three-fold and proposes to return US$750 million in surplus funds to shareholders through a return of capital over the course of the current calendar year.

Recommended action: Average down on open Barrick Gold positions.

We began our active coverage of Wheaton Precious Metals — a global leader in precious metals streaming — in September of last year with a buy-up-to price of US$48.50 per share.

Shares of Wheaton Precious Metals — which were similarly impacted by the recent weakness in the precious metals space — are currently in the midst of a strong upward move from the US$35 level in early-March to currently right around US$41.25 per share.



That impressive value growth can be attributed to the company’s stellar balance sheet performance for full-year 2020, which saw record revenue of US$1 billion and record operating cash flow of US$765 million. Net debt also decreased by US$275 million to just US$2 million — or essentially nil.

As a result, the company has increased its minimum quarterly dividend by more than 30% [as compared to 2020] to US$0.13 per common share.

Our original write-up on Wheaton Precious Metals is here.

Recommended action: Hold open Wheaton Precious Metals positions.

We commenced active coverage of Sibanye-Stillwater — a leading Platinum Group Metals (PGM) producer — in November of last year with a buy-up-to price of US$13.40 per share.

Since then, SBSW shares have risen by approximately 40% from US$13.40 per share to currently right around US$19 per share.



Despite numerous COVID-related challenges across its global operations, Sibanye was able to post year-on-year revenue growth of 75% to US$7.74 billion and record free cash flow of US$1.2 billion for full-year 2020.

Sibanye pays a dividend at the high end of the industry range with an approximate yield of 8.7% per average 2020 share price.

Our original write-up on Sibanye-Stillwater is available here.

Recommended action: Hold open Sibanye-Stillwater positions.

We also have physical gold-silver as a foundational component of our Tier-1 holdings.

With the continued deterioration of the purchasing power of the US dollar — and all fiat currencies for that matter — I am a staunch proponent of maintaining at least a portion of one’s tangible wealth in physical gold-silver with a strong emphasis on coins.

For those of you who’ve been with us a while, you know that my go-to person in the physical bullion space is none other than Van Simmons — partner and president of David Hall Rare Coins and one of the most highly-regarded coin experts in the United States.

With both gold and silver firming up and poised to trend higher in 2021 and beyond, I’d say there’s no better time than now to start building your rare coin portfolio.

For any newbies out there looking to get their feet wet in the exciting world of numismatics, I think a great starting place is my recent interview with Van from December of last year — which is available here.

Van’s a terrific guy and he’ll be more than happy to discuss building a rare coin portfolio of any size with you.

You can reach Van at van@davidhall.com or during business hours at 800-759-7575.

On an aside, as you’ve likely noticed, I typically recommend establishing positions incrementally, which allows for taking timely advantage of any temporary weakness in any of the underlying commodities.

That strategy has no doubt proved pertinent with the recent yet temporary pullback in the gold price.

As always, use your own best judgment based on your own personal risk tolerance in regard to establishing positions, averaging down, taking profits off the table, et al.

Please continue to refer to your monthly issues of Hard Asset Digest for new trading ideas and commodity trends from the leading experts in the resource space.

Yours In Profits,

Mike Fagan 
Editor, Precious Portfolio 

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Mike Fagan has mining in his blood. As a teenager he staked countless gold and silver properties in Nevada alongside his dad Brian Fagan, who created the Prospect Generator model that’s still widely used today in the resource space. One of those staking projects was put into production by a major Canadian mining company — a truly rare and profitable experience. That background uniquely qualifies him as a mining stock speculator. One of the most well-known names in the business, Mike is now putting that experience to use for the benefit of Resource Stock Digest, Hard Asset Digest, and Mike Fagan's Precious Portfolio readers.

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Previous Alerts

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