Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Time To Buy Junior Gold Mining Stocks

Commodities / Gold & Silver Stocks Sep 08, 2011 - 02:31 AM GMT

By: Jeb_Handwerger

Commodities

Recently two mining giants -- Goldcorp (GG) and Barrick Gold (ABX) -- published their bullish earnings reports showing increasing margins due to a rising gold price. Here is a perfect example of a report that's trying to tell us something. The hidden message in these glowing statements is of great significance to gold traders. What is the other side of the story?


The fly in the ointment may be that the majors need new blood. They are having difficulty making progress with their next generation mines; experiencing delays and shortfalls. There is a sense of urgency in their pronouncements of increasing the capital they are going to spend on exploration and development of two key emerging assets.

Goldcorp specifically identified the El Morro Project in Chile, where it's partnered with New Gold (NGD), and which has the largest potential increase in reserves. New Gold has had a major breakout at $12 and phenomenal month of August.

Read the writing on the wall. The future of the majors lies not so much in glowing statements but in their hidden meanings. These companies, as measured by the Market Vectors Gold Miners ETF (GDX), are getting more mature and are facing diminishing reserves and a rising gold price. This may be the reason why their share prices are underperforming -- they are sitting on large cash positions and must either increase dividends or look for growth through mergers and acquisitions.

My firm's area of specialization is in researching promising explorers, as measured by the Market Vectors Junior Gold Miners ETF (GDXJ), which will grow increasingly attractive as acquisition targets for the older majors. For example, the acquisition by Newmont Mining (NEM) of Fronteer.

Also witness the recent move by Agnico Eagle Mines (AEM) in investing $70 million dollars in a young promising company Rubicon Minerals (RBY), which had recently sold off to the downside. Also look at Aurico Gold’s (AUQ) takeover of Northgate Minerals (NXG) at valuation levels not seen in more than seven years. I realize that miners have been trailing bullion for several months and am convinced that their day is yet to come. Rubicon had recently published a decrease in resources, sending shares plummeting. Agnico seized the opportunity to make a very advantageous investment. In the Summer of 2008, Agnico had taken interest in Gold Eagle Resources at bargain prices. It didn’t take long for Goldcorp to buy the entire company, giving Agnico a significant profit. This may be exactly the template that other hungry majors will be looking to emulate as they buy emerging properties at discounted prices. As the price in gold bullion advances many situations increase in value. GST is always on the hunt for assets in the earth which are the mother lodes of the eventual bullion.

When the day of the junior miners comes, the profits will far outstrip those of bullion. From a technical standpoint, often times mergers and acquisitions are not readily discernible in chart patterns. Indeed, Fronteer had quite a nasty correction before it was acquired by Newmont. Suffice it to say that momentum traders rarely benefit from mergers in the making.

I've noticed that equity prices will fall below a rising 200 day moving average only to eventually break through on the way up. Interested parties might find juniors at irresistible bargains right now in comparison to gold bullion.

Read more in depth reports from Jeb Handwerger at Gold Stock Trades.

           Disclosure: Long GLD,SLV,GDXRos

By Jeb Handwerger

http://goldstocktrades.com

© 2011 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.


© 2005-2022 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