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was at $1.47 to the euro when we were bought out. Today it is around $1.07. There you have it – two myths busted: that gold should behave like a commodity, and, also, that it requires a weaker dollar to prosper. I would add a third while I am at it. This stunning outperformance has occurred without the most commonly presumed necessary condition for gold to rise: headline inflation.
That gold is a myth-buster should not be a surprise. For gold
is first and foremost a “good thing.” It is a currency that, uniquely, cannot be printed, and is among the only financial assets that does not represent someone else’s liability. It is “as good as gold” because it is, well...gold. Meanwhile, it possesses a brand that is more widely recognized than “Coca-Cola” or “Apple”. Over time, gold holds its value beautifully, and can easily outperform other asset classes when the conditions are right. Not that its detractors see it that way.
Alas, gold is presently out of favor. As I write this piece, Jeffrey Gundlach, known on Wall Street as the Bond King for his prescience, had this comment to make on CNBC about why he owns gold: “Assets that fall in price become unloved, humiliated. Assets that are up a lot in price have many supporters, even though the prices could be at a peak.” He summed up his philosophy as follows: “Sell hubris, buy humiliation.” Mr. Gundlach makes a serious point. As we have seen, great investors know that trends are born and sustained out
of derision and skepticism and end amidst general acceptance and ultimately euphoria. I should also note that he added the following observation: “If you go on a financial show and talk about gold, you almost get laughed off the stage.”
Having been in that situation comedy myself, if the audience gets beyond the laughter, I’m often asked if I’m surprised that gold isn’t higher today. The answer is no and that, to the contrary, I believe gold has acted brilliantly. With America’s currency screaming against its peers, the fact that gold is more than holding its own against even the almighty dollar is impressive. For what it’s worth, in my
view what we have witnessed over the last five years has been a correction within a long-term bull market. The first wave, which took gold from $250 to around $1,900, lasted for twelve years. For twelve consecutive years gold ended each and every year higher, whether that year had been a period characterized by strong commodities or weak commodities, inflation fears or deflation fears, a strong dollar
or a weak dollar, war or peace, prosperity or crisis. Now that’s a bull market. Perhaps, just perhaps, gold may need to retreat to below $1,000 to wash out the remaining weak hands. For historians like myself who have lived through those moments, such a move would be classic. But at this point, such a retracement is not a necessary requirement for a healthy gold market. The fundamentals are now in place such that the renewal of gold’s long-term uptrend, one that will take the next leg far beyond the all-time highs, doesn’t require any specific catalyst.
With that in mind, knowing its balance sheet renders it impervious to the prospect of going out of business if we do indeed get that pullback – but also knowing that it holds a fabulous portfolio consisting of a half interest in two of the greatest mineral deposits
in North America – NOVAGOLD is in my humble but biased opinion the most exciting, best risk/reward vehicle for investors to gain leverage to gold. Call NOVAGOLD the world’s finest unexpiring gold warrant, or call it a pure play on the best development-stage asset
in the industry; in either case, we as its largest shareholders, whose only mission is to find the best way to play a thesis, believe it is a uniquely attractive investment proposition. In today’s asset-starved gold industry, “category-killer” deposits are few and far between.
Yet that is precisely what we are dealing with here. In terms of its combined size, grade and production profile, Donlin Gold is truly in a league of its own. That we enjoy the competitive advantage of being located in Alaska, the second largest gold-producing state in the safest jurisdiction in the world, is more than merely icing on the cake. When institutional investors scramble for exposure to the sector, its qualitative and quantitative merits – plus being in a place where the rule of law is sacred – will render NOVAGOLD a “go- to” stock. As they say, “Watch this space.”
That this league-leading asset is stewarded by an all-star management team is important. When an executive group is known as the best in breed, a premium valuation is ultimately attached to its share price. I believe that we can expect that to happen here. This part of the company’s narrative begins with Greg Lang. The best of the best, prior to joining NOVAGOLD in 2012, Greg oversaw Barrick’s most significant North American operations, the jewels in the crown, as President of Barrick North America. He in turn recruited, and is supported by, an exceptionally experienced team of professionals, including Richard Williams, who successfully navigated Barrick’s
and Goldcorp’s Pueblo Viejo project before joining NOVAGOLD; Dave Deisley, whose accomplished career in permitting included
Long-term shareholders who understand and share our investment thesis.
Electrum Strategic 26.4% ResourcesLP
Van Eck Associates 8.4% Corporation
8.0% Paulson & Co. Inc.
Fidelity Management & 7.1% ResearchCompany
3.0% TheBaupostGroup,L.L.C.
Tocqueville Asset 2.9% Management,LP
44% Other
Market Capitalization based on 321.5 million shares issued and outstanding and NOVAGOLD share price of $5.32 as of January 31, 2017. Shareholder positions are based on the latest 13-F filings.
$1.7 2
B Market Cap
6