Your account will be managed at the Private Wealth Management division at the RBC branch in Beverly Hills, California. The gold mining stock account offers you the following benefits:
Your individual account will have a well-diversified and extensively researched portfolio of precious metal mining stocks. The account will be invested in large, medium and some small mining companies but with very large deposits measured in billions of dollars. We have no interest in risky small exploration stocks, small mining deposits or small operating companies.
The Gold Mining Stock Account uses two proprietary in-house computer programs to arrive at valuations for mining companies. One program is designed for major and mid-tier producers and the other is for developmental companies. Qualified developmental companies are mining companies with a major project usually with $2-10 billion worth of mineral resources.
We believe our developmental mining company valuation program is one the most sophisticated program of it’s kind in the world. It encompasses over 340 separate line items of information on a mining company as well as each individual project that the company is developing. This allows us to do our own in-house geological and engineering assumptions usually between 9 and 18 months before Wall Street guidance.
We believe this program and 37 years of experience investing in this sector allows us a significant advantage to identify quality projects at good values. The Account invests in companies with significant deposits of gold, silver, platinum, copper, zinc, lead and other metals, but mostly precious metals.
Strict rules and regulations from the S.E.C and the Canadian authorities prohibit various corporate statements regarding categories of resources and reserves and the economic viability of projects. Our experience in this sector, with the hard data guidance of our computer model and our extensive contacts with professional engineers and geologists allow us to run our own valuations and scenarios that can show a major deviation from the public market place valuations of a company or it’s projects. Sometimes the valuation by the market is too rich and we avoid these stocks. Many times the opposite is true and we take advantage of these situations.
The Account does not invest in any grass-roots exploration companies. This category is a crapshoot and is responsible for the bad reputation of the gold and precious metal mining sector. We only invest in companies that have properties with significant amounts of drill inferred resources. Usually our minimum cut-off is our own estimate of a minimum of 2 million ounces of gold or other precious metals or $4 billion worth of potential base metals.
To protect assets from political, economic and monetary uncertainty and instability -- including inflation or deflation and the repercussions of excessive government debt or currency depreciation -- we offer our Gold Mining Stock Account. Even with the rising levels of paper money, government debt and market speculation, it is still highly unlikely that an "unthinkable" economic accident could happen in the short to medium term, but just in case, history has shown that no matter what the economic situation, the long-term purchasing power of gold remains intact, which makes it a potentially important insurance or "hedge" for a portion of your net worth.
With the accelerating modernization of China, India and other developing countries, global demand for gold has significantly outpaced world mine output for many years, and we feel this established long-term trend will transform gold, silver and base metal mining into an attractive growth industry. China is now the largest consumer in the world of copper, zinc, lead, aluminum and soon nickel. A possible multi-decade demand increase in resources is developing that has never been experienced before.
Jewelry demand for gold alone continues to exceed mine production year after year. As progress and industrialization spreads to more and more areas of the world, gold jewelry, even in small and seemingly inexpensive pieces, adds up to millions of extra ounces of gold demand each year. For the majority of the last decade, gold jewelry demand alone has outpaced all world gold mine production.
Gold is also a time-honored global monetary asset. Government policies all over the world are many times devised for political gain, not economic health. Hence, in a world where in over 100 countries the local currency as a store of value is a speculation at best, gold is important. Various governments of the world continue to print money every day, to the tune of billions of dollars per week. By owning gold mining stocks, one in essence owns gold in the ground, an ideal investment in this climate. Globally the $570 trillion derivative market and the effects of a $12 trillion U.S. national debt are simply unknown, but a little caution never hurt when it comes to preservation of capital. Long term, gold has always proved itself to be a good place for a portion of one's assets.
During the greatest deflation in our recent history (1929-36) gold mining stocks went up in value. Homestake Mining shares went from $40 in 1926 to $544 in 1935. Gold as a store of value (inflation hedge) also works well. For example from 1977 to 1980, when inflation averaged 9% per year, many gold mining stocks went up 3-5 times in value. Gold mining stocks offer investors an opportunity to own companies that literally are mining "cash."
In 1973 the price of gold was $100/ounce and the Dow Jones was 1000 -- a ratio of 1 to 10. Gold was undervalued. In 1980 the price of gold was $800/ounce and the Dow Jones was 800 -- a ratio of 1 to 1. Gold was overvalued. At this writing gold is approximately $1400 per ounce and the Dow Jones is approximately 11,000 -- a ratio of 1 to 8. Gold appears undervalued again. This simple ratio compares the basic centuries-old yardstick of real asset value (gold) to a reliable index of corporate value (Dow Jones). Currently, the ratio shows gold to be still undervalued.
It is an excellent time to open your Gold Mining Stock Account and prepare yourself for what we believe will be a 5-10 year major bull market for gold investments. Below is a summary of the chief benefits to be gained from this type of account:
Gold mining companies can increase profits substantially with no increase in the price of gold. Mining companies, by putting more mines into production, achieve higher revenues and profits when the new mines go on line. Expansion can also take place when mining companies renovate and upgrade existing mines and increase production.
From a value standpoint, gold reserves in the ground are like having money in the bank. Also, most mining companies have properties containing a large gold resource which has been drilled and tested but not yet formally added to reserves. This represents hidden value not reflected on their balance sheets. Mining companies also own and lease vast tracts of potential mining land where gold has already been discovered, but where no advanced developmental work has been performed. As gold prices go higher or even remain level at prices above $850 an ounce, many of these properties could become mines. These also are "hidden assets."
Kenneth J. Gerbino & Company follows and studies the Canadian and North and South American as well as the African , Chinese and Australian mining industries. We review and research hundreds of mining companies per year. Our exclusive and extensive database is updated by continuous survey of expert industry and company contacts. In addition to our in-house expertise, we have an extensive network of mining people, including engineers, geologists and consultants, to refer to when researching a company.
We feel that the price of gold will rise on balance throughout the next 5-10 years as global jewelry and investment demand continues to far outpace world mine supply. Asian demand will also continue to accelerate, driven by population increases and strong economic growth.
The Gold Mining Stock Account will offer you exposure to gold, silver and some base metal companies that we feel have exceptional growth and value opportunities. This growth is based on the world demand for these resources and also because of the excessive amount of debt and currency increases (printing of money) that has prevailed globally, and in our opinion, to very uncomfortable levels.
Kenneth J. Gerbino
9595 Wilshire Boulevard
Beverly Hills, CA 90212
Phone: (310) 550-6304
Fax: (310) 550-0814
Kenneth J. Gerbino & Company
9595 Wilshire Boulevard, Suite 303
Beverly Hills, California 90212
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