Maria Smirnova has 20 years of investment experience. She first joined Sprott Asset Management LP (SAM) in 2005 as a research associate supporting the metals and mining team. She currently serves as Lead Portfolio Manager of Ninepoint Silver Equities Class and Co-Portfolio Manager of Ninepoint Gold and Precious Minerals Fund (funds sub-advised by SAM). Prior to joining Sprott, Maria served as a Product Development Analyst at Fidelity Investments. Ms. Smirnova holds a Master of Business Administration degree from the Rotman School of Management, University of Toronto, and a Bachelor of Commerce degree from the University of Toronto. She has been a CFA® charterholder since 2002.
1. Thanks, Maria for joining The Assay. To start off, how’d you get into mining investment?
I have always wanted to be a Portfolio Manager. After completing my Masters of Business Administration in 2005, I embarked on a journey to meet this goal. At the start, I did not have an industry preference, but I was very fortunate to meet Eric Sprott that year and he was looking for analysts. He hired me to be a base metals analyst initially, and over time I transitioned to analyzing precious metals companies as well. I now focus on gold and silver public equity investments at Sprott Asset Management LP (SAM). We sub-advise mutual funds for Ninepoint Partners LP and manage other accounts within SAM.
2. Can you give us insight into what you look for when investing in junior gold miners on behalf of Ninepoint Gold & Precious Minerals Fund and Ninepoint Silver Equities Class?
There are many factors to consider when investing in mining companies. But I believe that a portfolio’s positioning depends on what stage of the market we are in at any given point in time. For example, since we believe that we are currently in the early stages of a gold and silver bull market, we are looking for companies that have attractive growth and exploration prospects and that provide leverage to metals prices. We also look for companies with management teams that have demonstrated strong track records of success and that delivery on their promises. Companies that meet or exceed their guidance tend to outperform their peers. This generally means that management has discipline in how they run their business and that they apply operational excellence.
3. What was an example of an investment that checked all the boxes? What were the criteria for that investment?
Northern Star Resources (NST) has been a wonderful example of how a good mining company should be built and managed. NST was started in June 2010 and has generated significant value through both organic growth and M&A, and with little shareholder dilution. The company has grown its production and resources per share, while focusing on generating returns for its shareholders through dividends and a growing share price. The company’s operational excellence has been readily apparent during site visits both in Australia and in Alaska, where NST has one of its newest mines.
4. Does geography play a role in investment decisions?
We invest in mining companies globally and while we prefer politically and fiscally stable jurisdictions, such as Canada and Australia, we often find ourselves investing in far-flung places. We have investments in mining companies with mine assets spanning Asia, Europe, Africa and the Americas. We have an internal heat map that we use and there are certain “red” or “no go” zones, but for the most part, we evaluate our investments on a case-by-case basis. The reason is that location is not the only important consideration. We also need to evaluate how a company’s management team manages the risks and government relationships, and also how it establishes valuable community relations through outreach and programs that benefit the local population.
5. Going into 2020, what are your thoughts on where the gold price will go?
We have been gold and silver bulls for a long time. Our belief in the metals stems from their value as hard assets and financial asset diversifiers. We see rising deficits and higher debt levels around the world, and we see central banks globally having expansionary monetary policies. I call it a “race to the bottom.” In other words, we believe that given the developed world’s aging population, ever higher entitlements, underfunded pensions and rising debt levels, governments will continue to debase their currencies to stimulate growth and inflation. We will continue to see low interest rates – in fact, the total global negative-yielding debt reached all-time highs last year and peaked at about $17 trillion.
6. In 2019, gold was on a bullish run. What were the reasons for this run in your view?
The basic reasons for gold’s turnaround last year was what we call central bank U-turns. The Federal Reserve in the United States began lowering its benchmark interest rate and cut it three times in 2019 after having raised rates nine times since the end of 2015. In Europe, the ECB lowered its key interest rate and re-started its quantitative easing program.
7. The US-China trade war is on pause, but with tensions between the countries still present. Brexit is moving forward. There are anti-government protests around the world. And technology is changing faster than ever. How would you advise junior gold miners on the geopolitics today?
Unfortunately, you cannot change geology, but you can certainly make the best of the project(s) you have. My advice would be to focus on community and government relations, to have comprehensive programs in order to gain buy-in from local government officials and residents. There is a growing focus on ESG (environmental, social and governance), which is to say investors are focusing more on how companies manage these issues and holding companies more accountable. Those companies that can demonstrate that they take their ESG responsibilities seriously will be better able to attract capital going forward.
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