No mystery here...
Gold companies where management has 'skin in the game' outperform others - U.S. Global
New research by U.S. Global Investors shows that companies that have high levels of insider ownership have significantly outperformed their peers where this is not the case.
Author: Geoff Candy
Posted: Friday , 22 Jun 2012
GRONINGEN (Mineweb) -
Gold companies that have a high level of insider ownership have significantly outperformed peers with less insider ownership says U.S Global Investors.
Speaking to Mineweb.com's Newsmaker podcast, U.S Global portfolio manager, Brian Hicks explained, after attending a number of conferences over the spring and hearing many discussions about the difference in performance between bullion and gold stocks, a few anomalies caught his attention.
While a number of stocks are clearly very cheap on a relative basis, he said, there was a dislocation "in that you're really not seeing insiders buying their own shares and yet they're asking us to buy their shares and trying to convince us that this is a great time to invest because of the disparity between bullion and the mine shares."
Hicks compared the share price performance of 32 silver and gold producers to the percentage of "insider ownership" of these stocks and found that, "the companies that were in the top half of insider ownership clearly outperformed, in a very meaningful way, companies that were in the bottom half of insider ownership."
"Just to quantify that," he added, "this is over a three year time period that ended on June 13 and the entire universe of stocks had a median return of 10.2%. The top half in terms of insider ownership returned about 14.6% whereas the bottom half only returned 7.8%."
U.S. Global Investors CEO, Frank Holmes says that this qualitative measure fits well into the firm's existing framework of assessing stocks that focuses on relative valuations.
He explains, "We line them all up and compare who has the best or worst production per share, who has the best of growth of reserves per share and who has the best growth cashflow per share. And then the mosaic would include, is this event going to be positive or negative in the next 12 months, will it change momentum and then we make decisions to overweight or underweight those companies."
Intuitively such a finding makes sense, given that managers with more skin in the game are likely to work harder to ensure profitability, as Hicks explains, " clearly if you have a stake in the position or in the company, you're going to be more diligent, you're going to be more thoughtful in running that business and it looks as though performance is enhanced."
Notwithstanding these findings, with the advent of the gold ETF, management teams have become even more important at gold mining companies because investors now need a reason to choose the stocks over investment in the actual metal.
Holmes agrees adding that the gold ETF has created a "transparency of their performance on a relative basis.
"One of the things we noted in some research by CIBC was the cost now of looking for producing and shipping an ounce of gold worldwide is over $1500/oz, taxes have risen dramatically and the cost of ongoing production has gone up dramatically, so management is going to be very, very key in making very prudent decisions that are not dilutive to the shareholders that they can show this attractiveness on reserves and production per share growth."
See the article online here: Gold companies where management has `skin in the game` outperform others - U.S. Global - JUNIOR MINING - Mineweb.com Mineweb
June 22, 2012
June 21, 2012
#Gunvor's Timchenko eyes downstream buys | Reuters #Oil
Gunvor's Timchenko eyes downstream buys
ST PETERSBURG, Russia |
(Reuters) - Gennady Timchenko, co-owner of Gunvor, says now is the right time to buy downstream assets, as he eyes transforming his fast-growing Russian trading house into a vertically integrated energy business.But, in an exclusive interview with Reuters on Thursday, Timchenko said he was not ready for big purchases, such as the one-half stake in TNK-BP, Russia's No.3 oil firm, that has been put up for sale by British oil major BP.
"It (TNK-BP) is a very big company, we are not ready for such big purchases, we did not even discuss this subject," Timchenko said on the fringes of the St Petersburg International Economic Forum.
"We have become active in buying oil refineries now as we think that now is the right time to enter oil refining."
Gunvor recently bought bankrupt Swiss oil firm Petroplus's refinery in Ingolstadt, Germany, following an earlier deal to buy a plant in Antwerp, Belgium.
Timchenko added that Gunvor may look at other "interesting possibilities" in downstream if they arise.
Timchenko, viewed as having good relations with Russian President Vladimir Putin, said he owns just over 46 percent in Gunvor. Chief Executive Torbjorn Tornqvist owns 46 percent, while the rest is owned by management.
(Reporting by Katya Golubkova and Denis Pinchuk; Editing by Douglas Busvine)
Read the article online here: Exclusive: Gunvor's Timchenko eyes downstream buys | Reuters
June 20, 2012
End of the supercycle is also spelling the end of radical resource nationalism | #MINING.com
End of the supercycle is also spelling the end of radical resource nationalism
Frik Els | June 17, 2012
Last year according to an Ernst & Young survey of the world's 30 largest miners, resource nationalism jumped to the top of the risk list after 25 countries announced their intentions to increase their take of the mining industry’s profits and others contemplate outright nationalization.
A growing list of nations – and not just radical fringe territories such as Zimbabwe or Venezuela – but stable jurisdictions including Poland, Ghana and Botswana have been pushing for greater control and ownership of the resource sector on top of higher taxes and royalties as cash-rich mining companies become easy targets for politicians.
South Africa recently stepped back from nationalization, but is nevertheless tightening its grip on the industry. Although it has since backtracked in the run-up to elections in Mongolia set for the end of the month draft legislation put forward new provisions to cap foreign ownership of domestic companies at 49%.
Zambia has publicly acknowledged that the period of state-controlled copper mining was disastrous, but is also looking at ways to increase state ownership and intervention in its resource industry.
Indonesia surprised the global mining community in March after a new rule – Government Regulation No. 24 of 2012 – was quietly announced on the mining ministry's website which requires all foreign mining companies to sell majority stakes in their mining operations to locals. That news was in addition to new export duties levied on minerals.
The tide of resource nationalism may now be turning however argues the Financial Times because the world's biggest miniers "are slowing down – or even talking about cancelling – their investment programme, allowing them to play country against country".
Natural resources companies with a pipeline of, say, five projects in five different countries are now likely to build just two or three of those. Thus, executives have the power to cherry pick which combination of country and project offers the best returns.
The threat of a cancellation – or long delays – could be a powerful incentive for politicians to offer better terms to companies, executives mutter.
In particular, local and regional politicians will be particularly prone to lobby in companies’ favour in the hope of securing jobs and investments.
The paper says Australia appears to be leading the way in backing off from placing too onerous demands on resource investors and African countries are also taking a softer stance.
Changes in South American governments' attitude towards greater state control and revenue from mining are less evident, with a country like Peru struggling to contain protests against new mega-mines and Argentina seizing outright control of energy assets.
As attractive deposits become harder and harder to find in traditional markets, miners – especially those exploring for gold – are also pushing the limits of the political risk they are willing to take on.
Read more >>End of the supercycle is also spelling the end of radical resource nationalism | MINING.com
Frik Els | June 17, 2012
Last year according to an Ernst & Young survey of the world's 30 largest miners, resource nationalism jumped to the top of the risk list after 25 countries announced their intentions to increase their take of the mining industry’s profits and others contemplate outright nationalization.
A growing list of nations – and not just radical fringe territories such as Zimbabwe or Venezuela – but stable jurisdictions including Poland, Ghana and Botswana have been pushing for greater control and ownership of the resource sector on top of higher taxes and royalties as cash-rich mining companies become easy targets for politicians.
South Africa recently stepped back from nationalization, but is nevertheless tightening its grip on the industry. Although it has since backtracked in the run-up to elections in Mongolia set for the end of the month draft legislation put forward new provisions to cap foreign ownership of domestic companies at 49%.
Zambia has publicly acknowledged that the period of state-controlled copper mining was disastrous, but is also looking at ways to increase state ownership and intervention in its resource industry.
Indonesia surprised the global mining community in March after a new rule – Government Regulation No. 24 of 2012 – was quietly announced on the mining ministry's website which requires all foreign mining companies to sell majority stakes in their mining operations to locals. That news was in addition to new export duties levied on minerals.
The tide of resource nationalism may now be turning however argues the Financial Times because the world's biggest miniers "are slowing down – or even talking about cancelling – their investment programme, allowing them to play country against country".
Natural resources companies with a pipeline of, say, five projects in five different countries are now likely to build just two or three of those. Thus, executives have the power to cherry pick which combination of country and project offers the best returns.
The threat of a cancellation – or long delays – could be a powerful incentive for politicians to offer better terms to companies, executives mutter.
In particular, local and regional politicians will be particularly prone to lobby in companies’ favour in the hope of securing jobs and investments.
The paper says Australia appears to be leading the way in backing off from placing too onerous demands on resource investors and African countries are also taking a softer stance.
Changes in South American governments' attitude towards greater state control and revenue from mining are less evident, with a country like Peru struggling to contain protests against new mega-mines and Argentina seizing outright control of energy assets.
As attractive deposits become harder and harder to find in traditional markets, miners – especially those exploring for gold – are also pushing the limits of the political risk they are willing to take on.
Read more >>End of the supercycle is also spelling the end of radical resource nationalism | MINING.com
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