Some big-shot hedge fund managers are following Tom Kaplan’s charge into gold assets. Who’s Tom Kaplan?
This March two of the world’s biggest investors became believers in a company with next to no revenues and $352 million in losses over three years. Funds run by billionaires George Soros and John Paulson invested a combined $175 million in NovaGold Resources. Both Soros and Paulson are seriously bullish on gold, but why did they bet on a Vancouver mining company with an unimpressive history?
They were following the lead of Thomas Kaplan, 47, a little-known New York City billionaire investor who thinks gold’s bull run is far from over. An Oxford-trained historian, Kaplan believes that the last 40 years, when gold was not the world’s reserve currency, were an aberration and that gold will revert to the top store of value as it was for 5,000 years. He means it: Kaplan’s family office, Tigris Financial Group, manages close to $2 billion in gold assets.
These latest investments show that after decades of neglect and derision, gold is no longer solely the province of conspiracy theorists and fly-by-night promoters. Billionaires, big money managers and Wall Streeters are jumping in, even as few ways remain to play this game. The price of gold has already increased by 70% in the last three years, and gold doesn’t generate any income that can justify an investment multiple. But then, if you believe that government spending run amok and easy money will result in the decline of Western civilization, you don’t need any multiples to look at.
In Pictures: Seven Ways To Invest In Gold
The simplest ways to own gold: bullion, futures or shares in an etf. Less simple: shares in mining companies. But there are not that many well-established mining companies to choose from.
Kaplan, who declines comment, is not a mining operator–he’s an ideas guy. He got into investing in Israel, where he consulted for hedge funds. In 1995 he started by securing land rights to what turned out to be a decent Bolivian zinc mine, though it was marketed as a silver deal. He founded Apex Silver Mines ( SIL – news – people ) with $10 million of seed money from Soros. The company went public, but by 2004 Kaplan sold much of his stock and left the company before the mine was developed–and before Apex filed for bankruptcy protection last year. It had made wrong-way bets on derivative contracts.
There have been other mining deals. In Romania Kaplan has invested alongside Paulson in Gabriel Resources, taking an 18% stake in a firm that has for nine years tried to get approval to develop a big gold mine. Ironically enough the problem for Gabriel has been opposition from a Soros-funded environmentalist group. Soros has said the group’s demands are legitimate but that it operates independently from him.
Kaplan’s personal gold mine has been natural gas. He started what would become Leor Energy in 2003, buying leases in an East Texas field. Goldman Sachs ( GS – news – people ) and Merrill Lynch got on board, and Kaplan joint-ventured with Canada’s Encana Corp., which drilled and found 2.4 trillion cubic feet of gas. Encana bought up the whole field in 2007 for $2.55 billion, giving Kaplan a takeaway of some $2 billion.
Not everyone walked away happy. Kaplan’s nephew, Guma Aguiar, who was chief executive of Leor and got $200 million, claimed Kaplan cheated him out of his fair cut. The two have sued each other in Florida federal court, where they have traded various assertions about who played a more important role in the gas find. Since then Aguiar has moved to Israel, where he bought a soccer team and became known for his antics, like announcing, falsely, that he had visited a captured Israeli soldier in Gaza. Aguiar’s family recently committed him to a psychiatric institution.
Kaplan’s NovaGold deal started in January 2009, when his New York investment outfit, Electrum Strategic Resources, made a $70 million investment for a 28% stake and warrants for more. Since then the stock’s market cap has quintupled to $1.3 billion, as investors apparently were lured by NovaGold’s 50% stakes in two big assets that are for once not situated in a geopolitical hot spot. One, called Donlin Creek, is in Alaska. NovaGold says it has 29.3 million ounces of gold. The other is British Columbia’s Galore Creek, with 7.3 million ounces of gold and 8.9 billion pounds of copper.
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Why are Big Hedge Funds Investing with Tom Kaplan?

Some big-shot hedge fund managers are following Tom Kaplan’s charge into gold assets. Who’s Tom Kaplan?
This March two of the world’s biggest investors became believers in a company with next to no revenues and $352 million in losses over three years. Funds run by billionaires George Soros and John Paulson invested a combined $175 million in NovaGold Resources. Both Soros and Paulson are seriously bullish on gold, but why did they bet on a Vancouver mining company with an unimpressive history?
They were following the lead of Thomas Kaplan, 47, a little-known New York City billionaire investor who thinks gold’s bull run is far from over. An Oxford-trained historian, Kaplan believes that the last 40 years, when gold was not the world’s reserve currency, were an aberration and that gold will revert to the top store of value as it was for 5,000 years. He means it: Kaplan’s family office, Tigris Financial Group, manages close to $2 billion in gold assets.
These latest investments show that after decades of neglect and derision, gold is no longer solely the province of conspiracy theorists and fly-by-night promoters. Billionaires, big money managers and Wall Streeters are jumping in, even as few ways remain to play this game. The price of gold has already increased by 70% in the last three years, and gold doesn’t generate any income that can justify an investment multiple. But then, if you believe that government spending run amok and easy money will result in the decline of Western civilization, you don’t need any multiples to look at.
In Pictures: Seven Ways To Invest In Gold
The simplest ways to own gold: bullion, futures or shares in an etf. Less simple: shares in mining companies. But there are not that many well-established mining companies to choose from.
Kaplan, who declines comment, is not a mining operator–he’s an ideas guy. He got into investing in Israel, where he consulted for hedge funds. In 1995 he started by securing land rights to what turned out to be a decent Bolivian zinc mine, though it was marketed as a silver deal. He founded Apex Silver Mines ( SIL – news – people ) with $10 million of seed money from Soros. The company went public, but by 2004 Kaplan sold much of his stock and left the company before the mine was developed–and before Apex filed for bankruptcy protection last year. It had made wrong-way bets on derivative contracts.
There have been other mining deals. In Romania Kaplan has invested alongside Paulson in Gabriel Resources, taking an 18% stake in a firm that has for nine years tried to get approval to develop a big gold mine. Ironically enough the problem for Gabriel has been opposition from a Soros-funded environmentalist group. Soros has said the group’s demands are legitimate but that it operates independently from him.
Kaplan’s personal gold mine has been natural gas. He started what would become Leor Energy in 2003, buying leases in an East Texas field. Goldman Sachs ( GS – news – people ) and Merrill Lynch got on board, and Kaplan joint-ventured with Canada’s Encana Corp., which drilled and found 2.4 trillion cubic feet of gas. Encana bought up the whole field in 2007 for $2.55 billion, giving Kaplan a takeaway of some $2 billion.
Not everyone walked away happy. Kaplan’s nephew, Guma Aguiar, who was chief executive of Leor and got $200 million, claimed Kaplan cheated him out of his fair cut. The two have sued each other in Florida federal court, where they have traded various assertions about who played a more important role in the gas find. Since then Aguiar has moved to Israel, where he bought a soccer team and became known for his antics, like announcing, falsely, that he had visited a captured Israeli soldier in Gaza. Aguiar’s family recently committed him to a psychiatric institution.
Kaplan’s NovaGold deal started in January 2009, when his New York investment outfit, Electrum Strategic Resources, made a $70 million investment for a 28% stake and warrants for more. Since then the stock’s market cap has quintupled to $1.3 billion, as investors apparently were lured by NovaGold’s 50% stakes in two big assets that are for once not situated in a geopolitical hot spot. One, called Donlin Creek, is in Alaska. NovaGold says it has 29.3 million ounces of gold. The other is British Columbia’s Galore Creek, with 7.3 million ounces of gold and 8.9 billion pounds of copper.
Page:
1
2
Next >

Read the article on Forbes

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