As portfolio manager of the Midas Fund, Kjeld R. Thygesen has developed a touch all his own. As of Aug. 31, his tiny, $10 million gold fund racked up a 42% return, compared with an average of 6% for the 42 precious-metals funds tracked by Morningstar Inc. The fund's dazzling return has little to do with the price of the yellow metal, however, or even with companies mining gold in South Africa, the world's single-largest gold producer. Thygesen finds his biggest winners by venturing off the beaten path, into the jungles of Guyana, or the waters off Namibia, in pursuit of small-cap mining companies that he thinks will hit it big.
Precious-metals funds are notoriously volatile, winding up at the top of the heap one quarter only to be at the bottom soon after. But the success of Midas Fund, formerly called Excel Midas Gold Shares, is no flash in the pan. It is the top-performing precious-metals fund for the one-year, three-year, and five-year periods ending June 30, 1995, according to Morningstar. With such statistics in tow, Thygesen hopes to build assets to $100 million by 2000. Recently, the fund dropped its 4.5% load.
RECORD DEMAND. The Midas Fund may be classified as a gold fund, but Thygesen stresses that it is a "mining growth fund, too." That's a good thing, since the price of gold has been static for about two years, ranging from $375 to $395 an ounce. While Thygesen expects record demand for gold in Asia and Japan to contribute to "a pop" in the gold price in the fall, he isn't betting the farm on it.
Thygesen distinguishes himself from other precious-metals funds by investing a significant chunk of assets in speculative mining ventures. He puts 25% or so of the fund in mining and resource stocks that have made a discovery but are still in the development stage. That can mean investing in "very small-cap, new project companies" such as Canadian mining company Diamond Fields Resources Inc. Diamond Fields accounts for about half of the fund's gain year-to-date. In the fall of 1994, Thygesen bought the stock at 4. When the company started drilling, it uncovered a greater-than-imagined deposit of base metals such as nickel and copper. The stock currently trades at 91.
ON THE ROAD. Thygesen is also finding winners in what he calls "intermediate gold production companies," small- to medium-cap growth companies looking to expand production or acquire other companies. A current favorite is Dayton Mining Corp. The company just commenced production on a gold mine in Chile, and with costs of about $150 to produce an ounce of gold, it can achieve a hefty profit margin even if the metal stays stuck in its present trading range, says Thygesen.
The Midas Fund focuses on North American mining stocks, but Thygesen is eyeing new investment opportunities in Third World countries. He is searching in South America, in Indonesia, in the Philippines--even in Russia and in the former Soviet states. That keeps Thygesen on the road about a third of the time, which helps push fund expenses above the 1.7% average, to 2.1% of assets. The ratio should fall as the assets of the fund increase. And with a gain of more than 40%, current shareholders probably aren't too concerned about Midas Fund's expense ratio.