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All opinions expressed by Thomas Brigandi on this website are solely Brigandi’s opinions and do not reflect the opinions of any of his affiliations (Last Article: Feb. 27, 2012). Thomas R. Brigandi is an associate analyst in the Global Project and Infrastructure Finance Group at Moody's, where... More
  • Triple Gold Investment Conference: Two Gleaming Investment Opportunities
    The Triple Gold Investment Conference, which took place on July 20 and July 21, was co-sponsored by the Astrologers Fund and du Pasquier & Co. at the Princeton Club in Midtown Manhattan. The conference included several compelling presentations from several precious and base metals companies. Moreover, executives from rare earth element and lithium companies from around the world also made persuasive arguments in support of their case to the numerous institutional investors who attended the conference.
    In fact, several of the companies who presented at the conference were clients of the New York and Paris-based investment bank du Pasquier & Company. According to Jean-Sebastien Jacquetin, a Director at the bank:

    “du Pasquier’s only goal is to meet and exceed the needs of its clients. Whether they are a Singapore-based hedge fund looking to diversify into public equities or a French alternative energy company looking to acquire capital to expand their operations globally, du Pasquier stands ready to provide a suite of investment banking and asset management services to help them attain their goals.”
    There were many persuasive arguments made by each presenter for their respective companies including: cheap valuation relative to industry competitors, strong projected revenue and EPS growth, and a number of other interesting points. However, out of the fourteen emerging mining companies, two really stood out and made the most compelling arguments for delivering shareholders strong performance.
    The first standout investment opportunity from the conference was the lithium mining company Nemaska Exploration. The Quebec-based miner, which trades on the TSX Venture Exchange under the ticker NMX, is currently focusing its efforts on extracting a number of minerals from its lithium holdings on various properties in Quebec.  
    According to the Toronto-based securities firm, Dundee Capital Markets, “Nemaska Exploration’s Whabouchi hard-rock lithium project appears to be well on its way to a positive Definitive Feasibility Study at the end of this fiscal year and spodumene concentrate production by year end 2012.”
    “The measured and indicated estimates of lithium holdings Nemaska currently owns on its properties is over 25 million tonnes,” according to CEO Guy Bourassa. “More importantly, our market capitalization per tonne of lithium is a tad under $100, as a result, we carry one of the cheapest valuations in our industry. To put in into perspective, Talison Resources carries the second cheapest valuation at $488 per tonne. And at the top of our comparable company universe, Galaxy Resources holds the greatest valuation at $1,891 per tonne. This illustration shows just how undervalued Nemaska is.”
    As a result of Nemaska's rock bottom valuation, Dundee Capital Markets has initiated the company as a Buy, with a price target around 100% greater than the closing price on July 21. In fact, according to a June 9th report issued by Dundee Capital Markets’ analysts David Talbot and Mansur Khan:
    “We view Nemaska as a relatively low technical risk way to play the lithium market as it plans to pass the processing risk on to its buyers, The Whabouchi hard rock spodumene deposit is amenable to conventional open-pit mining and processing. It does not have those processing complexities, particularly as a lithium concentrate producer, typically seen in its brine counterparts such as brine chemistry or evaporation pond management. Located in the mining friendly province of Quebec, the company enjoys excellent infrastructure and support from the Cree Nation community of Nemaska.”
    In addition to the low risk and huge mineral holdings Nemaska’s investors gain exposure to, they also gain exposure to a company that is 10% owned by China’s largest lithium battery materials provider, Tianqi Lithium. “Tianqi’s goal was get exposure to the North American lithium market through its investment in Nemaska and we are seriously considering building a transformation plant in Quebec with Tianqi currently” claimed Nemaska’s CEO Guy Bourassa. 
    In fact, lithium demand has been steadily increasing over the past decade as cell phones and laptops, (which use lithium-ion batteries to run) are being manufactured at an increased rate in an effort to accommodate demand coming from emerging nations. This should bode well for Nemaska’s market price and valuation moving forward as that demand increases as the global economy heats up in the coming years and decades.
    Thus, based on its staggering lithium reserves, ownership stake by the largest Chinese lithium producer, cheap valuation relative to industry competitors, and production starting in 2013, Nemaska is a great way to get exposure to one of the most important natural resources that is powering the technology industry globally.  
    In addition to Nemaska, the other compelling investment opportunity from the conference was South American Silver. The Vancouver-based mining company trades on the Toronto Stock Exchange under the ticker symbol SAC, has a market capitalization of $220 million and is well financed with over $30 million in the bank.

    According to CEO Greg Johnson, “South American Silver owns properties in Bolivia and Chile with measured and inferred deposits of: 230 million ounces of silver, 1,481 million ounces of indium, and 1,082 million ounces of gallium. Additionally, we have a strategic investor in the Zamin Group, which own 19.7% of South American Silver and has a track record of running successful mining operations in South America. Additionally, it is important to note that the Zamin Group has strong government support across South America.”

    South American Silver is the second largest development stage silver resource miner and has an enterprise value to resource ounce of $0.80, giving it the lowest valuation of all its industry competitors.
    Thus, based its staggering holdings of the key precious, base, and strategic metals, a rock-bottom valuation relative to its industry, and a strong strategic partner in the Zamin Group, South American Silver is a very compelling investment opportunity at its current market price and should be strongly considered by investors looking to gain exposure to an emerging South American miner poised for strong free cash flow growth moving forward.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Jul 24 6:39 PM | Link | Comment!
  • Brazil – A Powerful Developing Nation Weathering the Sovereign Debt Crisis of the Developed World

    Recently Brazil, like most emerging economies, has been grappling with the economic and political shockwaves coming from Europe. Brazil’s main equity index, the Bovespa, has fallen roughly 15 percent from its April 8th top due to concerns that the austerity measures being put in place across Europe’s weakest economies, the PIIGS, might disrupt Brazil’s economic recovery. Brazil’s financial markets have been hit hard as a result. However, Brazil has fared better than other developing countries like China whose Shanghai Composite index has fallen 20 percent in the same time frame.

    The European crisis has not relented since this colossal shoe dropped back in early April. In fact, on May 28th, the credit rating agency Fitch Ratings downgraded Spain’s sovereign debt, citing the same reasons that we all knew for some time. That the austerity measures currently being implemented as a result of the joint IMF and EU bailout of European nations in need of restructuring their enormous debt obligations may harm growth moving forward.

    The effect the developed world’s debt crisis has had on the developing world has been pronounced. However, emerging economies have been resilient to not only the recent debt crisis, but also the credit crisis which took place in 2008. Since then, Brazil has been at the top of its game, even while external economic events were laying siege to the vast majority of the world, Brazil’s economy has persevered and grew at a staggering rate.

    According to the article “Brazil's booming economy - Flying too high for safety” from The Economist, “New skyscrapers are going up along Avenida Faria Lima in the business district of São Paulo. Sales of computers and cars are booming, while a glut of passengers has clogged the main airports. Brazil created 962,000 new formal-sector jobs between January and April—the highest figure for these months since records began in 1992. Everything indicates that over the past six months the economy has grown at an annualised pace of over 10%. Even allowing for an expected slackening, many analysts forecast that growth in 2010 will be 7%—the highest rate since 1986.”

    I am a firm believer in the global growth story that Brazil represents. Going forward, Brazil’s abundant resources and growing consumer base will continue to propel it as one of the worlds leading emerging market nations. Moreover, this degree of economic prowess will transform Brazil into a developed economy which may rival the United States and Japan in the not so distant future if Brazil keeps on growing at this elevated pace.

    For this reason, I would be long Brazilian equities with commodity exposure. In particular, there is still a massive amount of growth potential for companies such as Vale (NYSE:VALE) or Petrobras (NYSE:PBR), two of the world’s premier commodities firms. As China and India continue to develop, their demand for raw materials will continue to grow, and this huge demand will be supplied in part by these two firms.

    Vale, which trades on the NYSE under the ticker VALE, is the second-largest mining company in the world, second only to the Australian mining giant BHP Billiton. In addition to its numerous mining operations, Vale is also the largest producer of iron ore, which has had a huge demand from China and will perhaps continue to do so for some time. As a result of this demand, coupled with a stable political environment in Brazil, and strong company financials, I think Vale is a company worth owning at these levels.

    The other significant commodity company in Brazil is the energy giant Petrobras, which trades under the ticker symbol PBR. Petrobras is the largest company in Latin America by both market cap and revenue. Additionally, Petrobras is one of the global leaders in deep-water and ultra-deep water oil production. Although deep-water drilling might face opposition as a result of the recent British Petroleum deep-water platform debacle in the Gulf of Mexico, there are several major oil fields off the coast of Brazil which are supposedly some of the largest reserves of oil on the planet. As a result of the world’s dependency on oil both now and in the near future, coupled with the scarcity of this resource, it is evident that Petrobras will be growing for some time to come. Due to this notion, I would recommend this company as a buy based on its fundamentals and long term growth potential going forward.

    For those looking for exposure to Brazil as a whole, take a look at the iShares MSCI Brazil Index Fund. This is an exchange-traded fund that trades under the ticker EWZ and which holds shares of about eighty of Brazil’s largest companies. As an added bonus to the diversification this product provides, this ETF is relatively inexpensive with an expense ratio of 0.65%. Additionally, over the past five years this Brazil fund has returned around 30% annually.


    Brazil is a land of opportunity. It is a land plentiful with resources and it has an economy growing at record speeds. The European debt crisis and perhaps an impending American debt crisis will only be temporary bumps in the road to economic prosperity for Brazil. Thus, I am a firm believer in the appreciative nature of the three securities listed above and think the risk and return scenarios associated with each is superb. 

    Disclosure: No positions

    May 28 9:10 PM | Link | Comment!
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