Ann: Quarterly Report March 2016-MML.AX, page-34

KingHarris

Going into the results season, I held 3 Aussie miners: MML, MLX and PRU. I also previously held RSG, but switched that into PRU after the merger. Also had been a holder of TRY and MOY, but took profits.

Truth be told, none of these names covered themselves with glory, with the exception perhaps of RSG. The reason I came out of RSG was that the CEO had previously been flagging that one of its 2 mines, Ravenswood, may be put on care and maintenance and not pass a LOM extension review (note its high AISC in the Q1 results). That would have made RSG a 1 mine (Syama, albeit a very good mine) company until Bibiani comes on stream way, way down the line. With POG above $1,300, I guess the Ravenswood LOM extension economics looks a bit better, yet this is still a risk.

PRU, like MML, had a bloody awful Q1. Unlike MML, I think their ore problems may be more transitory and with the merger they have a big, fat growth opportunity. Following my 4 criteria formula, however, I still kicked it out due to a) the negative quarter, b) terrible guidance and trust problems. It may be a takeover target (Randgold, EDV or RSG as suitors), but just looking for M&A plays is not my style.

MLX, likewise, bloody awful Q1, so out it went despite it having good value to me and lots of potential growth.

I made stacks of money on MOY, but took profits. Is still cheap but wonder what comes next once production up to 80k oz. On my watch list.

TRY still fulfils my 4 criteria. Only negative was that they didn't upgrade their reserve estimates at Q1 and so question mark still hangs over LOM and growth. I think this is more a question of lack of drilling results more than anything else. However, I took ample profits in this name before the results, but is on my watch list to go back in.

So I guess you are asking what I do like? Number one pick is Canadian name Endeavor Mining (EDV). Hat tip to GoldBear for putting me on to this. Like RSG and PRU, EDV is a West African specialist but unlike them has a spread of mines (4) with a new one just acquired and another big one to come on stream in 2017. Is still very cheap, bags of growth (550k oz to 900k oz over next 3 years), great Q1 just released (the conference call is live Webcast at 9:00 am Toronto time today), and the company does what it says on the side of the tin. Management just oozes class.

Going back to the Aus names, the reason I liked the small- mid-cap Aus goldies back in January was that they were soooooo much cheaper than the bigger cap names. But now that MOY, TRY and RSG have run up by over 200%, the gap with the majors has closed dramatically. NST, for example, is up only 30% and with gold at $1,300 is looking cheap. Multi-mine so less risky than the small caps, has a growth pipeline and management has been exceptional. You appear to be getting a big cap name with big cap risk, but with almost the same valuation as the small caps. NST is not as cheap as EDV, but not far off.