A Niche for Gold Mining in a Concentrated Equity Portfolio: A Wall Street Transcript Interview with Christopher P. Bloomstran, President and Chief Investment Officer of Semper Augustus Investments Group LLC

Wall Street Transcript

67 WALL STREET, New York - April 2, 2013 - The Wall Street Transcript has just published its Investing in Gold and Value for Downside Protection Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Value Investing - Long-Term Investing - High Quality Companies - Global Investing - Investment Strategies - Large Cap Investing - Longer-Term Investing - High Quality Companies - Investing in Gold - Long-Term Value Conservation - Precious Metals

Companies include: Berkshire Hathaway Inc. (BRK-A), Newmont Mining Corp. (NEM), Barrick Gold Corporation (ABX), Kinross Gold Corporation (KGC), Mercury General Corp. (MCY), Pepsico, Inc. (PEP), Johnson & Johnson (JNJ), General Electric Co. (GE), Microsoft Corporation (MSFT), The Coca-Cola Company (KO), Citigroup, Inc. (C), Leucadia National Corp. (LUK), Exxon Mobil Corp. (XOM) and many more.

In the following excerpt from the Investing in Gold and Value for Downside Protection Report, an expert portfolio manager discusses his investment philosophy and his portfolio-construction strategy:

TWST: You own mining companies, but do not own physical gold?

Mr. Bloomstran: We have never owned physical gold. We have believed for a long time, and wrongly so, that the leverage you get from owning the mining operations would give you an operationally leveraged advantage in a rising gold price environment. We bought our first gold mining companies in the late 1990s when we were starting the firm. Then we owned Newmont Mining (NEM), Barrick Gold (ABX) and Amax Gold, which was acquired by Kinross Gold (KGC). We sold Barrick and Kinross both really well in early 2008, and later bought Kinross back at much lower prices. We have added rather substantially to our positions in Newmont and Kinross over the last three or four years.

So we were first buying the gold miners in the late 1990s, close to the lows, after the price of the metal had descended way down from 1980s' high of $850 an ounce to the low of $250. In the case of a Newmont, which we bought really at the lows in late 1990s, they then had a cash cost to produce gold of 160 bucks an ounce; all-in costs were still below the very low tick on the spot price of $250, so the company was making money even then.

A simple rise to $300 per ounce would give you huge amounts of upside profitability, and further increases to $400 and beyond would give you obscene amounts of upside if you held costs constant. The reality has been, which you kind of know when you run mining companies going in is, that as the metal price increases, as commodity prices increase, the cost to mine that commodity goes up; costs are far from constant.

The same can be said for oil and anything else you extract out of the ground. Energy costs, which are 20% of the cost of gold mining, labor costs, another 20% to 25%, and really most other expenses have risen exponentially, they have risen...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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