From the other board. Credit to number581.

http://online.wsj.com/article/BT-CO-20111223-704080.html

(This article was originally published Thursday.)

--Toronto fund manager takes a serious look when others wouldn't bother

--Fund manager Brockelsby says Probe Mines most likely the 'gold discovery of the year'

--The fund is outperforming its peers

 
   By Caroline Van Hasselt 
   Of DOW JONES NEWSWIRES 
 

TORONTO (Dow Jones)--Toronto fund manager Gerry Brockelsby, of Marquest Asset Management Inc., tends to listen when others tune out. That's why he's been able to buy stocks cheaply and then watch analysts race to catch up.

"We're willing to step forward and take a serious look when most people wouldn't," he said.

Case in point: Probe Mines Ltd. (PRB.V, PROBF), a precious metals exploration company that's run by David Palmer, who holds a Ph.D in geology from Montreal's McGill University and spent 15 years as an exploration geologist and consultant to Canadian mining companies before joining Probe in 2003.

The company owns 100% of the Borden Lake gold project near Chapleau in northern Ontario on what's known as the Cadillac Break fault line. The project has an initial resource estimate of 3.8 million ounces of gold. When Palmer approached Brockelsby last spring he only had six drill holes into the ore body. No analysts followed the stock. Today, he has 118 drill holes and has hit gold each time, Brockelsby said. Now, six analysts cover the stock and another three to four are clamoring to get on board, he said.

"This is probably the gold discovery of the year in 2011," said Brockelsby, who manages the C$15 million Marquest Resource Fund.

Probe is expected to report its "measured and indicated" findings early next year. Brockelsby believes it will convert 50%-60% of its estimated reserves to "measured and indicated," which is a closely watched gauge that fuels investor confidence and helps determine a company's worth.

Probe, which trades around C$2.04 on the Toronto Venture Exchange, is "trading at US$35-US$40 an ounce in the ground, which is at least a half undervalued compared to its peers," said Brockelsby. "We think it has great management, a great ore body and has huge potential from here to grow reserves."

The four star-rated Marquest Resource Fund is ranked No. 1 in its category by Morningstar Canada. Though its one-year return through Nov. 30 is negative 6.2%, that's still better than its peers, which have lost 18.2%, according to Morningstar. The fund has returned 20.1% since inception in 2003 and 30.9% over three years.

Brockelsby does not believe that the commodities cycle is over yet given supply challenges and unprecedented demand from emerging-market economies, particularly China. "We still have the European problem and that will probably linger for some time, but the [U.S. and China] are straightening themselves up and starting to fly right here," he said.

His top pick is Orbite Aluminae Inc. (ORT.T), a Montreal-based company that found an environmentally safe way to extract alumina from clay in Quebec's Gaspe region. "They have a billion tons of reserves on only 5% of their land package," Brockelsby said. "It's massive."

Orbite believes that it can supply all of Quebec's aluminum smelters, which is 12% of the world's capacity, with smelter-grade alumina and 20% of the market for high-grade alumina that's vital to the aerospace industry.

"We try to identify these companies just a little before the maddening crowd, so we get them cheap and then if they produce, like Orbite or Probe say they can, the world is their oyster and people beat a path to their door," Brockelsby said.

-Caroline Van Hasselt, Dow Jones Newswires; 416-306-2023; caroline.vanhasselt@dowjones.com

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