# Report of the Investment Manager
During 2019, the Falcon Gold Fund benefited from a significant and im- portant change in the precious metals markets. After a multiple-year downtrend and extended bottoming process, gold markets broke through price resistant levels that had held for six years. Gold prices av- eraged $1,395 per ounce during 2019, with a year-end finish at $1523 per ounce.
Gold’s steady rise throughout the period began as financial markets dis- counted the impact of a global economic slowdown due to trade wars. As the U.S. Federal Reserve raised interest rates at the end of the 2018 calendar year, and market volatility notably increased along with a weaker U.S. dollar, gold moved higher. By late January, the U.S. Feder- al Reserve had to backtrack on its interest rate stance, which provided further support for gold prices. During March through May gold prices traded in a relatively flat and tight range before breaking out in late June, moving above a three-year resistance level of approximately $1,350 per ounce. The continuing rhetoric around the China - U.S. trade war sup- ported gold’s advance during July while broader markets swooned in early August with extensive concern over negative interest rates. This enabled gold to break out, above an even longer six-year resistance level of ~$1,550 per ounce – a price last seen when gold prices dramatically corrected in the spring of 2013. The rise in the gold price increased visi- bility of misaligned valuations within the precious metals mining equity sector and encouraged heightened merger and acquisition activity as well as asset sales during the final quarter of 2019.
Stocks that did well during the year included the following:
- Detour Gold, improved its board, management and operations by the middle of the year before getting an all stock bid from Kirkland Lake Gold in November.
- NovaGold Resources received greater interest among investors look- ing for resource leverage to its gold deposit located in the safe North American mining state of Alaska.
- Alamos Gold was re-rated during 2019 as it demonstrated the poten- tial of its Canadian operations at Young-Davidson and Island Gold.
- Pan American Silver was re-rated with more favorable metal prices which made its assets, more valuable and meaningful to keep as op- posed to sell, which was considered; and its initial La Colorado Skarn resource deposit was better than market expectations after only a year of definition drilling.
- Wheaton Precious Metals Corp. benefited from its gold and silver stream portfolio and was re-rated throughout the year after resolving the tax dispute with the Canadian Revenue Authority in late 2018.
- AngloGold Ashanti Limited saw its stock rise throughout 2019 as it focused on restructuring its mining portfolio to be less exposed to South Africa with asset sales from that country and a focus on more profitable operations in South America and Australia.

Underperformers for calendar 2019 included the following:
- OceanaGold underperformed on a relative basis during the year after outperforming during 2018. Operational delays and permitting issues at the Haile mine and Didipio mine, respectively, held back the stock performance during the second half of 2019.
- Fresnillo saw higher operating costs than expected and lower silver prices pull its stock valuation down especially during the second half of 2019. Production and cost guidance were lowered during the year for 2019.
- Barrick was an outperformer on a relative basis in late 2018, when it acquired Randgold which has held in the Fund. During the 1H19, Barrick did not outperform as much, and the position was eliminated before it began to outperform on a relative basis once again – because of the liquidity and market cap size which is appealing to generalist investors looking for large cap exposure to gold mining.
- Golden Star went through a management change and re-assessment of its resource and mine plan at its Wassa mine. This broke the mo- mentum the stock had earlier in the year, in early August, and since then the stock has struggled as management addressed its plans for the underground operations at Wassa.
- IAMGold has struggled with some social issues at its Rosebel mine and operational issues at its underground Westwood mine. The mar- ket did not want to see the company spend the capital necessary to build out the Cote Gold project. The market has overly discounted the company for their jurisdictional exposure and not given them credit for their ability to advance projects or add resources.
- Gold Standard Ventures was not able to add the value at its Nevada resource expected by the market after it raised funding for explora- tion and before it published its preliminary economic assessment. The merger of the Newmont and Barrick Nevada assets made GSV’s assets less appealing. All of those events were seen as unfavorable constructs for the company.

The end of the 12-month period finds broader financial markets and re- lated valuations at unsustainable levels for the trillions of dollars of neg- ative yielding debt trading around the globe. With gold breaking out to new highs in all currencies during 2019 except in U.S. dollar terms, we think it just a matter of time before it does. Meanwhile, equity valua- tions within the precious metal mining sector are attractive and do not fully reflect the more constructive gold price environment that evolved over the past year. These developments along with a weaker U.S. dollar and Middle East tensions, during the final days of December, have put a solid base under gold and positions precious metal equities for potential outperformance during 2020.

Translation (ENDE, 2019-12-31):
# Bericht des Portfoliomanagers
lisiert werden. Eine Einschätzung der Wirtschaftlichkeit dieses Projekts wurde nicht erstellt. Zudem machte die Fusion von Newmont und Bar- rick Nevada die Vermögenswerte von Gold Standard Ventures weniger attraktiv. Alle diese Ereignisse wirkten sich negativ auf den Aktienkurs der Gesellschaft aus.
Derzeit werden weltweit Schuldentitel im Wert von mehreren Billionen US-Dollars zu negativen Zinsen gehandelt. Vor diesem Hintergrund be- finden sich die breiteren Finanzmärkte und deren Bewertungen zu Be- ginn des Jahres 2020 auf unhaltbar hohen Niveaus. Im Jahre 2019 ist der Goldpreis in allen Währungen ausser dem US-Dollar auf neue Rekord- werte gestiegen. Wir gehen davon aus, dass es nur noch eine Frage der Zeit ist, bis der Goldpreis auch gegenüber dem Greenback auf ein Allzeit- höchst steigt.
Die Bewertungen im Edelmetallsektor bleiben attraktiv. Unserer Mei- nung nach reflektieren sie nur ungenügend die im letzten Jahr eingetre- tene Verbesserung des Umfelds für Gold. Der eher schwächere US-Dollar und die Spannungen im Nahen Osten Ende Dezember bilden gute Vo- raussetzungen für eine mögliche Outperformance von Gold und Gold- minentitel im 2020.