Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Monitoring Takeover Targets In Gold and Silver Junior Mining Stocks

Companies / Gold & Silver Stocks Dec 22, 2010 - 03:03 PM GMT

By: Jeb_Handwerger

Companies

Best Financial Markets Analysis ArticleThere is a growing scarcity of available precious metal mines in the world. The old majors such Barrick(ABX:NYSE), Goldcorp(GG:NYSE), and Newmont(NEM:NYSE) are facing diminishing reserves in their existing mines. They are mature miners with pockets bulging with cheap dollars. Moreover these majors are competing with the Chinese, Russians, Japanese and Koreans who have all shown an interest in expanding their precious metals assets and diverting assets away from paper currencies into real assets. All of them know it is cheaper to buy growth rather than to find it. They are like the Red Queen in "Alice in Wonderland", who must take two steps forward just to stay in the same place.


Sitting on cash and not converting it into resource growth can be deadly for a large company in this ebullient precious metals market. Many ponder why precious metal prices are rising, yet many majors are sitting on their laurels afraid to make the plunge to acquire projects. This has led many institutional investors and mutual funds to flock to the smaller explorers who are delivering consistent results to the market that characterize growth. Many of the developers have underperformed and this certainly has been an explorers market. I do not have to work hard to prove this point.

The small miners have been significantly outperforming the large cap producing mining companies. Investors are looking for resource expansion and growth. Many top companies are leaner and stronger with far superior assets than they were in 2007. Companies are able to expand developing discoveries at lower costs due to the weak economy and cheaper oil. Remember back in 2007, oil was up to $140 a gallon. Now costs are more inexpensive and precious metal prices are significantly higher. The operating margins have significantly improved. Some of these potential projects that were once marginal are gaining more interest as the high price of precious metals is improving project economics of marginal projects. Now the question is who will be acquired. The best way to do that is to screen for the best mining companies using both a fundamental and technical approach. To learn more about my methods for selecting market winners go to my website at http://goldstocktrades.com.

I believe companies will acquire and invest in juniors due to fears of further bailouts in Europe and currency devaluations in the United States during 2010. Several U.S. states are on the verge of bankruptcy. France is in danger of losing its triple A credit rating and many European sovereigns have already been downgraded. The reaction to debt issues have been radical moves from central banks and governments to print and inflate asset prices at any cost. Deficits are soaring and investors are flocking to junior mining stocks. Many high quality juniors have just recently made recent moves and are just beginning to return to pre-credit crisis highs. If the majors do not act soon many of these high quality- high grade projects will be swallowed up from the international demand for hard and real money.

There are very few high quality projects with production potential which suites the need for majors. The majors are growing increasingly compelled to scour the planet for eligible deposits. The gold price has advanced over 25% this year and silver is up over 50% and investors are curious which major will make the next deal. Discovery rates are dropping and there are a lack of viable low risk deposits for a major. Faced with the prospect of declining profit margins and depleting mines the majors must speed up the pace of seeking M&A activity. Such a search is not without risks. Venturing into foreign lands, dealing with unstable governments, operating in the midst of drug cartels and well armed bandits they pay top dollars for blue sky potential in safe jurisdictions and close to infrastructure. Yet there are high quality mines in the United States especially in Nevada that have been overlooked.

In 2010, majors began making moves that gave hefty premiums for blue sky potential and high grade assets. Recently the acquisition of Goldcorp (GG:NYSE) to purchase Andean Resources demonstrated how confident the Goldcorp team feels in the potential upside of the Cerro Negro project. Investors looking to make money in the mining sector should study similar projects that have all the criteria that majors are paying top dollar for. The Cerro Negro project has high grade exploration upside, low cash costs, blue sky potential in a mining friendly jurisdiction.

In their urge to merge these majors are overlooking suitable prospects in their own backyard. Here in the safer, stabler turf of the United States there are hosts of friendly candidates waiting to be acquired. One candidate which I have informed my readers about for several months is Fronteer Gold.

Fronteer Gold (FRG:AMEX) has a huge land position in Nevada, second only to Newmont(NEM:NYSE) and is consistently announcing high grade results from its 100% owned Long Canyon Mine. They have been impressing the markets by expanding the mineralization to the northeast and in their last press release they showed high grade mineralization to the west. This is demonstrating to the mining community what an incredible deposit this is becoming and how it is open in multiple directions. The recent results also validates Fronteer's (FRG:AMEX) move to acquire Auex Ventures in order to take a 100% control of this asset. Fronteer has just not discovered a mine, they have discovered a whole new trend in a mining friendly jurisdiction near infrastructure. This mine has the potential to get huge. Drilling results are continuing to expand high grade intersections of around 10 grams per ton. Now with the recent transaction this past week of their Michelin Uranium Deposit, Fronteer is in a strong cash position and now is the largest shareholder of Paladin Energy, a world class uranium miner. This provides Fronteer with liquidity. At anytime they can raise money through selling shares and not diluting shareholders to build their gold discoveries. Paladin is the eighth largest producer of uranium with a pipeline of uranium projects and in a strong financial position. This is an investment for shareholders who believe we are in the beginning of a uranium bull market. I believe in a couple of years the price of uranium will move much higher, placing FRG in a financial position to build world class gold mines without needing financing or diluting shareholders. It also gives a concrete value to any potential suitor in case they want to purchase Fronteer. On Fronteer's books they have about $120 million of cash and around $250 million of Paladin Energy, an impressive balance sheet for an emerging mine developer.

Fronteer is considerably outperforming gold bullion over the past two months. While gold has been making fake breakouts, Fronteer has shown high volume breakouts signifying institutional interest. Now that it is over $10 I expect more mutual funds to rerate Fronteer and its pipeline of high quality projects and investments. The recent transaction strengthens Fronteer financially and will fuel their potential to fast track their world class, high grade Long Canyon Project. One does not need to look far for beauty.

As my grandfather once told me "why look elsewhere when the girl next door is so nice." Stay posted.

Disclosure: My family and I own shares in FRG and I follow it in my newsletter.

You are invited to partake of a free 30 day trial of my premium service at http://goldstocktrades.com/premium-service-trial where you can get daily reports on mining stocks, precious metals and forex.

By Jeb Handwerger

http://goldstocktrades.com

© 2010 Copyright Jeb Handwerger- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in