Terence van der Hout: Technically, an exploration company that has no assets can just go to zero—there are a number that are doing that—whereas producers will always be worth something, even at fire sales.
That's another consideration that we've been looking at on the downside. Very recently, we've been subtly shifting from producers and near-producers to advanced developers. We see a turn in the markets. Those companies are well leveraged to the gold price and have a fairly extreme undervaluation to catch up with. Normally, they will be revalued to something relating to the amount of resource they produce.
One of the companies that we've been invested in for a while is OceanaGold Corp. (OGC:TSX; OGC:ASX). It has been producing gold in New Zealand at a steep cost, but it has a gold-copper deposit it brought to production in the Philippines that is performing very well. It's a classic story of a startup producer that is beginning to be valued at its full potential.
TGR: Do you think it's beginning to be recognized by the market because of the diversification of the company or because of the new resource and reserve that it came out with?
TvdH: It was a function of OceanaGold's performance in production rather than the resource update. The added resources were mainly from its newly acquired El Salvador project, which is miles away from production. OceanaGold is finally being rewarded in a market that's turning.
