Bill Powers brought Greg Orrell back to Mining Stock Education after five and a half years. Orrell is president and portfolio manager of OCM Gold Fund. Powers asked him to put 2008–2012 next to today. Orrell’s first cut was enthusiasm. Last cycle had it. This one has not.
The last bull, in his telling, began when the Nasdaq peaked after the late-1990s blow-off. Gold had been sold down toward $250 when the United Kingdom was disposing of bullion. Clinton-era surplus talk sat in the rear-view. A contracyclical bid started in 2001. It ran into the 2007 mania, wiped out in the housing smash, then gold shares bounced while the rest of the market kept falling. The run lasted into 2012. Money came into the gold funds.
This cycle is different on that last point. “There hasn’t been a lot of money coming into the gold mutual funds.” Retail has been muted. Orrell’s reason is the missing Nasdaq break. He still watches debts and the dollar. He watches the Nasdaq rollover more. Until broader participation arrives, he sees room to grow. That is the whole interview in one line.
Why the Metal Ran Without the Old Crowd
Gold shares have still worked for five years. Orrell dated the change to 2022. Before that, rising yields knocked the metal. Then Russia invaded Ukraine. Western governments froze Russian foreign-exchange reserves. Other official buyers decided Treasuries were less safe. They bought gold. The yield link broke. That is the official-bid story this page has been writing all year. August ETF inflows of about $18 billion and China’s 20 tonnes sit in the same file. Orrell did not need those prints. He needed the reserve freeze.
Are the listed producers cheap? He thinks the market still will not capitalize $4,500 gold, and did not capitalize $5,500 when the metal tagged it, because nobody trusted the price to stay. Net-asset-value multiples have room. Gold in the ground should get a higher mark as skepticism fades. That is a valuation claim. It is not a date.
How He Builds the Book
The fund is a ladder. Senior producers that mine north of a couple million ounces sit near 20% to 23%. Then intermediates. Then junior producers. Silver is a 5% to 7% sleeve. Royalty names about 5%. Exploration and development 10% to 13%, with a hard ceiling near 15% because a mutual fund must be able to sell. He buys open-market stock and private placements. Size is liquidity first. On redemptions he cuts the small names that are not working, then the names that will need more cash. Core positions stay.
He calls himself value-oriented and still hunts growth. The metric is per share. Reserves per share. Production per share. If you cannot grow per share, he sees no point. For producers he starts with a blunter test. Are you making money? Talent at the top is who compounds through cycles. Some names have sat in the book more than 20 years. Old Barrick and old Goldcorp cards have morphed into whatever those companies became. The drawer of dead business cards is the other education. One promoter, he said, handed him three or four titles over the years.
Exit rule one: management changes the story you bought. A gold project that suddenly becomes a copper chase or an underground fashion is a sale. Exit rule two: extreme valuation. Take some off. Mind the tax lot. He cited a gold-and-silver name bought at a couple of dollars and later near $40. He cited Oh My Gold Mines bought at four cents and later a couple of dollars. Take out cost plus a bit. Resize so it is not 10% or 20% of the fund. Let winners run. Cut losers. If a name has not worked in about 12 months, and gold is not the excuse, it goes.
Cash is a tell. Retail wires from Schwab and Fidelity tend to arrive at tops. Cash can then sit over 10%. When we taped he was under 1% cash. He read that as bullish and as retail still liquidating. “The masses tend to be wrong.” If he needs a parking spot and still likes the short-term gold tape, he will sit in a bullion fund for a stretch. He will also move harvested producer gains down into juniors when he sees a hole. Liquidity still caps the junior sleeve.
Who Allocates Capital — and Who Permits It
The industry used to treat the miner as a levered option on gold and skip the dividend. Exploration money got wasted. Institutions left. That hangover, Orrell said, is why gold shares still look historically cheap. Majors now pay out and farm discovery to juniors. Taking a junior stake puts an asset on the balance sheet instead of an exploration write-off. If the hole works, the buyout is cheaper later.
Who allocates best among the public producers? He named Agnico first. Many positions, which is the job. B2Gold has marks in names such as Snowline and in South America. He had not yet seen those marks turned into a full takeout.
Snowline at its current cap is the live test. Can it build, or does Agnico or B2Gold wait until permitting is far enough and buy the whole thing? Consolidation is the business. It always was.
Juniors he will name as examples, not as a shopping list: Miata Metals in Suriname; smaller files such as South Atlantic and RTG that do not yet have a mineable deposit. He wants talent that can walk a project. Jurisdictions North Americans underweight, in his view: Suriname, Ghana — he pointed at G Mining-type stories — and Morocco. Canada and the United States have become the same problem. Permitting timelines of 10 to 20 years kill the time value of money. The Lassonde curve’s development trough got longer. Many discoveries now wait for the next up-cycle to get built. That is the Canadian tax this page keeps writing. Orrell put it in one sentence. A discovery you cannot permit is a long option with decay.
What an Investor Is Meant to Do With This
Powers asked why anyone would hire the fund instead of GDX or GDXJ. Orrell’s answer was performance and access to names a retail screen will miss — Montage as a 20-bagger in his telling, Oh My as another. Funds also have losers. He cuts them. Those claims are his track-record pitch. This page is not a rating of OCM. It is a map of how a 28-year manager still sees the cycle as early on participation and late on permitting.
Canadian readers can steal the process and skip the product. Seniors first. Streams and royalties as a small sleeve. Juniors only after discovery, sized to liquidity. Sell when the story changes. Do not wait for an index rebalance. Do not treat $4,500 gold as already in the share price. Do not confuse ETF inflows into bullion with mutual-fund inflows into miners. Orrell says the second crowd is still missing. UBS saying a September hike can spark a knee-jerk in the metal is the other clock. A thin participation rally can still gap.
Conclusion
Orrell’s cycle test is not a price target. It is a flow. Last time, the Nasdaq broke and the funds filled. This time, official buyers moved the metal and retail has not filled the share funds. Miners still do not get credit for high gold. Juniors hold the discovery talent. Canada made the build clock too long. Agnico writes a lot of small cheques. Liquidity is the governor.
Five and a half years were good for gold, he told Powers. He hopes the next five and a half rhyme. Hope is not a process. His process is on the tape. Use it or leave it. Do not confuse it for a buy list.
Important information
This article is commentary based on a Mining Stock Education interview with Greg Orrell of OCM Gold Fund. It is not a recommendation of that fund or of any stock named in the conversation. Performance claims are the manager’s. Past results do not predict future results. Gold and mining shares can fall. Speak with a licensed adviser. The author and publisher accept no liability for actions taken on this article.