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June 11, 2009

Junior Miner Buy-Out Binge
by John Rubino

Gold is making another run at $1,000, silver is up even more in percentage terms, and the financial markets are showering the established miners with cash: In February Newmont raised $1.7 billion, while Yamana, Agnico-Eagle, and Kinross Gold have between them raised over $800 million. And last week Goldcorp offered to sell $750 million of convertible bonds, but ended up with $860 million because the offering was oversubscribed.

At the other end of the size spectrum, dozens of junior miners that a year ago were running out of cash and contemplating the end of their dreams are suddenly able to raise enough capital to keep exploring and producing. Here's a (very) partial list of good news announced in the past few months:

• NovaGold added 14.7 million ounces of gold to the reserves of its Donlin Creek property, which it owns jointly with Barrick Gold. The mine is expected to produce over one million ounces of gold annually for 20+ years.

• Allied Nevada increased its gold and silver reserves 244% and 298%, respectively, and now projects full mine operation by mid-2009.

• Aurizon Mines found two new veins of gold on its existing properties. Both deposits are still open, implying that they'll yield more positive results as further drilling defines them.

• Since June 2008 Detour Gold has made a total of nine new gold discovery announcements at its Detour Lake property.

• Rubicon Minerals recently announced "a new deep intercept of lower grade gold mineralization at a depth of 4,715 feet (1437 metres) below surface, some 1,050 feet (320 metres) deeper than the previous deepest intercept. The new intercept suggests high potential for additional gold mineralization to depth."

• Chesapeake Gold announced that its Metates project now has measured and indicated resources of 14.7 million ounces of gold, 396 million ounces of silver and 2.6 billion pounds of zinc.

• Endeavour Silver's Q1 silver-equivalent production rose 22% to 736,235 ounces, while its "total silver-equivalent mineral inventory" rose 24% to 62.3 million ounces.

• Atna Resources announced that its Pinson joint venture with Barrick Gold "continues to host numerous high grade gold intercepts on a number of structures all located in a relatively small area. We feel that Pinson has a good potential for development due to its gold grade, location in the heart of the northern Nevada gold belt and close proximity to existing autoclave, roaster and mill complexes."

I could keep going, but you get the idea. Lots of juniors, it seems, are about to become mid-tiers -- or at least viable producers. But many won't make it that far. With the majors as a group failing to replace the metal that they're taking out of the ground and capital suddenly plentiful, the conditions are ripe for a buy-out boom in which the big guys start snapping up the best juniors. Once the party gets going, the question on everyone's mind will become "who's next?", and hot money will send the most likely prospects through the roof.

STORE YOUR GOLD OFFSHORE WITH GOLDMONEY

John Rubino
DollarCollapse.com

John Rubino is author of Clean Money: Picking Winners in the Green Tech Boom (Wiley, December 2008), co-author, with GoldMoney's James Turk, of The Collapse of the Dollar and How to Profit From It (Doubleday, January 2008), and author of How to Profit from the Coming Real Estate Bust (Rodale, 2003). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine and edits DollarCollapse.com and GreenStockInvesting.com.