Chris Beer

Successfully combines geology and financial expertise.

Jade Hemeon 8 October, 2004 | 1:00PM
Chris Beer, vice-president and senior portfolio manager at RBC Asset Management Inc., once led the adventurous life of a geologist. Now lead manager ofRBC Precious Metals andRBC Global Resources Sector, he finds that his geological training comes in handy.

"Working in the field as a geologist meant spending a lot of time walking up mountains with 30 pounds of rocks on my back," Beer says. "I always had an interest in the stock market, and thought that geology and financial expertise would be a good combination."

The $339-million RBC Precious Metals, which he took over in February 2003 after John Embry left RBC, has a one-year return to Aug. 31 of 6.9%, beating the category's median loss of 3.9%. The $12.2-million RBC Global Resources, which Beer took over as lead manager at the same time, has a one-year gain of 27%, well ahead of the Natural Resources category's median return of 19.9%.

Beer seeks to outperform in the Precious Metals category by investing a significant portion of the assets of RBC Precious Metals in the more volatile medium- and small-cap stocks that are not widely followed by analysts. "Senior stocks are well known, and don't have as much growth potential," he says. "Large established companies tend to be relative underperformers in a rising gold price environment."

Beer thinks gold bullion could rise by US$50 to US$100 an ounce during the next 12 to 18 months. The U.S. dollar is weakening, and while interest rates are edging up slightly, they are still low in real terms after inflation, he says.

As the U.S. dollar loses purchasing power, Beer expects that gold will remain an attractive store of value. In addition, he noted that both investment and jewellery demand have been increasing in Asia, particularly from India and China.

On the supply side, less gold is being mined annually than is used worldwide. Beer says the shortfall is being made up by central banks selling off reserves, an activity that is not sustainable indefinitely.

"It takes six to eight years to build a mine and there hasn't been a lot of new investment in recent years," says Beer. "The seniors tend not to be risk-takers at the grass-roots level and have ignored exploration and development -- which is why we like to invest in junior companies."

Beer has spent 11 years researching and analyzing the resource sector, in addition to four years of practical field training as a geologist with Noranda Exploration Ltd. in Newfoundland. He began his investment career in 1993 with Lévesque Beaubien Geoffrion Inc. in Toronto, working as an associate analyst covering precious metals, basic materials and utilities.

He moved to RBC Dominion Securities Inc. in 1996, then to MacDougall, MacDougall & MacTier Inc. In 2000, he joined the RBC organization to focus on global resource companies.

Beer graduated in 1987 from Memorial University of Newfoundland with a bachelor of science in geology. After working for a few years as a geologist, he joined the Canadian Armed Forces Officer Training Program with the goal of being a pilot, but his plan was foiled a year later when he found he needed eyeglasses. He returned to university, obtaining an MBA from the University of Toronto in 1993 before embarking on his investment career.

Beer pays a lot of attention to management teams, looking for experience in all stages of bringing a mine on stream, including financing, exploration, further financing, development and production. RBC Precious Metals usually invests in about 60 companies, compared to 40 or so in RBC Global Resources, where the portfolio is diversified across energy, chemical and service companies.

"We use a rifle approach, which is more targeted than shotgun and allows companies to have an impact," says Beer. "We need a sufficient number of names to compensate for those that don't work out, but those that do tend to work out well."

RBC Precious Metal's biggest holding is currently Placer Dome Inc. ( PDG/TSX), at 8.5% of assets. If a position gets close to 10% of fund assets, becomes stretched in valuation or experiences deterioration in its projects, he will "work it down."

In 2003, Beer's portfolio turnover was about 75%, and he expects it to be a bit lower in 2004. "There is a high risk/reward ratio in this business," he says. "Disappointing drilling results may sometimes be a reason to sell, but I might stick with a company that has other promising properties."

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Jade Hemeon

Jade Hemeon