Big, Undeveloped Gold Deposits Boosting Junior Share Prices


"The share prices of junior miners with big gold deposits moved upwards with remarkable consistency in August as investors began to reconsider at the sector."

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With remarkable consistency juniors with large gold deposits, especially in the five million ounce plus range, got a late August bump. Generally speaking, the shareprices of such juniors had dropped to Hades-plumbing lows in May, June and July. Yet in the past two weeks or so many of them made a quick climb. With heady shareprice heights from last year for comparison, if these junior souls were six feet under in July, then they are now back up around four or five feet. Under still, but digging out.

To recap. Juniors with large mining projects on their hands, in gold or otherwise, fell out of favour to the extreme among risk investors (or a lack thereof) this year. Fear of large capital costs was acute. But, as noted in these pages in early August that fear has made gold ounces in the hands of some of these juniors look cheap. Indeed a couple months earlier one newsletter writer and geologist, Mickey Fulp, pointed out it might not be such a bad idea to take a look at some of the junior companies you once thought were too expensive to get into. He wasn't making a direct reference to juniors with big gold deposits. However, among those juniors that flew like Icarus last year, big gold juniors were some of the loftiest. Then the wax melted and so many of them plummeted back to earth.

The recent bump, as such, may not mark a turnaround, but it's pervasiveness is certainly curious. A survey of some of the bigger names confirms the late August trend upward. While juniors with gold ounces in the five - or more - million ounce range are typically still well-off 52-week highs, many of them have jumped in recent weeks, sometimes doing better than gold or the market itself. Sabina Gold & Silver is over C$3.00 after touching below C$2 in late July. Keegan Resources was mostly under C$3.00 in July but hit the mid C$3s late this month. Prodigy Gold was under C$0.60 for much of the month previous, but is now just shy of C$0.70. Seabridge Gold, under C$14 in July, is now over C$16. Detour Gold was in low C$20s a month or so ago, but it is has broken C$26. International Tower Hill is up from around C$2.50 in July to over C$3.00. And Guyana Goldfields has gone from under C$2.00 in July to near C$2.80 in late August.

The simple explanation would be the price of gold, which has done well in recent weeks, hasacted as a catalyst. But there are other factors at play. No one is going to say that financing these days is easy, especially through equity. However, debt deals, and more creative solutions such as royalty or streaming sales, are being made (thanks in part to pervasively low interest rates) on solid mining projects. That helps one keep the faith. And as ever there is the prospect of mergers and acquisitions. If there hasn't been a flood of these, there have been a few that show multimillion ounce gold deposits are being sold for prices that are at least not dismal.

To name three: Iamgold bought Trelawney and its 6.9 million ounce gold deposit in Ontario for C$608 million, cash and shares. This equated to about $89 per ounce, mostly inferred. Then Yamana Gold bought Extorre Gold Mines and its Cerro Moro gold-silver project, which has 2.4 million ounce gold equivalent in resources, for C$414 million, mostly in cash. That translated to about C$173 per ounce gold equivalent. And on Monday of this week Inter-Citic, which owns a 4.4 million ounce gold deposit (about equal parts inferred and then measured and indicated) said it had supported a cash takeover for C$250 million from Western Mining. The implication was C$57 per ounce, the lowest of these three examples. Overall though, the numbers are reminiscent of 2011 when gold ounces sold for around C$90, on average. And more importantly, if you are breaking out the calculator to evaluate big gold deposits in the hands of juniors, the numbers satiate. Many gold deposits are trading for less, sometimes far less. In this difference investors can make their bets.

Kip Keen

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