The Gold Report: In January, you told The Gold Report that the price of gold is driven by market panic and inflation, neither of which looks imminent. If investors can’t expect higher gold prices in the near term, why should they be in this space?
Thibaut Lepouttre: I’ve never been a goldbug but I see gold as a form of asset diversification. There’s nothing wrong with having some exposure to precious metals in a portfolio, both in the physical form and in the form of precious metals mining equities. Mining companies are much like any other company. You should find the ones that have free cash flow or have set their sights on positive cash flow, even when the gold price is range bound. It’s up to investors to make sure that they know what they own and understand the financial situation of those companies.
TGR: How are you playing this space?
TL: I want reliable, low-cost precious metals producers and some companies with development-ready projects. I try to identify companies with projects that are viable at the current gold price and that should be able to get financing because their projects’ internal rates of return (IRR) are still acceptable at $1,200/ounce ($1,200/oz) gold or lower. I avoid companies with projects with high capital costs because the markets want companies that are small, lean and mean. I’m not investing in companies that need gold at $1,500/oz or $2,000/oz to make a project work.
TGR: You’re based in Belgium. Greece recently made a $224 million ($224M) payment to the International Monetary Fund (IMF). Essentially, that’s an interest payment on its European “credit card,” but the country is still negotiating with the IMF, the European Central Bank and the European Commission on its next bailout. How do you expect these negotiations to …read more