Capital Group Believes in Gold
Back in March, investors were curious when Agnico Eagle’s chief officer, Sean Boyd, announced the company had landed “an important new strategic institutional investor” and sold $220 million of stock to a single, unnamed backer in a private placement. Mr. Boyd apparently spent three years courting the fund manager, who was revealed in a recent regulatory filing to be Capital Group Companies Inc.
This is part of a recent move from Capital Group into the gold market. With a commitment of over $1-billion to Agnico and Barrick, Capital Group has taken a big step into the gold space which is bound to turn some heads. This qualifies as a contrarian investment from the L.A. based asset manager, which has a track record of 80 years and invests $1.47-trillion (USD) for institutional and individual clients.
Buying into a pair of Canadian miners is also a significant shift in thinking within Capital Group, because until recently they had a relatively small exposure to mining in general and even smaller exposure to gold specifically. Capital Group has not commented on their recent investment and they have a long-standing history of declining to speak on investment decisions.
Analyst Steven Butler from GMP Securities said Agnico Eagle is an attractive stock play because “it’s one of the only senior gold producers that is replacing production with new reserves through its exploration programs, with a good growth profile right through 2010.” Capital Group’s investment in Barrick came from open-market purchases, with regulatory filings showing the fund manager picked up 35.7 million shares over the first three months of the year, an amount currently worth about $785 million (Canadian). Barrick is the world’s largest gold mine, and according to analysts, Capital Group expressed interest as a drastic period of shedding assets to pay down debt came to an end. Barrick proves itself to be a disciplined, low-cost producer.
The gold market is in its own league. Some individuals will always hold gold as a hedge against governments that debase currencies and others will continue to put bullion in a bunker with their canned food and ammo, against a coming apocalypse. And then there are many veterans who always have gold projects on the go. Fund managers such as Capital Gold invest based on fundamentals. They don’t buy stocks like Agnico Eagle and Barrick unless their value is going to increase. As more investors come to the same conclusion and embrace gold, the sector is going to shine.