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- September 29, 2011 Edition of the Stateside Report
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September
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10 comments:
Despite the pessimism in the world financial markets the wave of mergers and acquisitions in the junior resource sector goes on unabated. The latest merger that has taken place is in the news release section of your website.
"U.S. Gold and Minera Andes (MAI) have agreed to form a new company McEwen Mining." on 09/22/11
Other recent mergers from the news releases posted on your site are:
"Franco-Nevada to acquire Lumina Royalty Corp. for $66 million" on 09/22/11.
"Trelawney announces that 88.8% of Augen Gold Corp. shares have been tendered to its offer..."09/21/11.
"Compania Minera Milpo S.A.A. to acquire Inca Pacific Resources Inc." on 09/06/11. The buyout of Inca Pacific is at a 84.8% premium to the closing price of the company's shares on August 31, 2011.
The last one could be a double merger of sorts. First Hathor Exploration acquired all the shares of Terra Ventures, a junior uranium explorer via a plan of arrangement on August 22, 2011. Then Cameco Corporation made a hostile bid for Hathor Exploration Ltd. valuing the company at $3.75/share on August 29, 2011. On September 14, 2011, Hathor rejected the bid saying it was "opportunistic" and too low of a valuation for the company.
I list these mergers to make the point that despite market's attitude toward the shares of junior resource companies, industry insiders know that the Net Asset Value of the solid junior explorers and mining companies remains intact. This shows that industry insiders know that the long term trend in commodities will be sustained for several years. I think we will see many more mergers and acquisitions before the end of the year.
At this time it is good for investors/speculators to be patient. I think unfortunately the current market volatility will be with us for awhile. I feel that most shareholders in the juniors resource stocks should at least wait and see if their company is snapped up by a major doing some bargain hunting.
Well is sure doesnt help things when we have the illustrious US Federal Reserve Board declaring that there was "significant downside risks" to the American economy. Anything these guys say is taken as the word of God precipitating huge moves in the markets. Watch your mouths you goddam peckers!! Gotta wonder if these idiots are short the market.
I think you have nailed it all in one. I also think their strategy will ultimately fail. My personal experience it is not easy to speculate in the junior resource market. It is very volatile and I have had great gains and big losses.
I think that the hardest part is that each stock is very different from the others. It takes a great management team and talent to build a great exploration or mining company. My greatest loss was with East Asia Minerals (EAS). The company had everything going for it. It had great support in the market, a great share price, and positive reports from analysts. When the company missed its resource estimate forecast the whole thing came apart and it dropped like a stone from $6.00/share down to its current price of .71/share. This all happened while there was a great upswing in the junior resource stocks.
Even if the market is moving in you direction, you still need a solid company with solid management to be successful. I would say that this is a great time for investors who have the patience and time to research and find the great resource stocks that the market is throwing for nothing. I do feel that special interests are doing all they can to knock down the resource stocks, and make profits by shorting them. This won't last for ever. Day by day the strong companies in this sector stand out as solid investments as the mainstream stocks collapse.
I think soon we will hit the bottom in this market and then it is on up from here. We may still be couple of months away from this point, so patience will be needed to wait out the storm. If you want a good pep talk on the value of gold stocks and precious metals this is interview with Bob Chapman of the International Forecaster newsletter is great to listen to:
http://bobchapman.blogspot.com/2011/09/bob-chapman-if-you-are-in-gld-and-slv.html
I think my final thought is which comes first a 20-30% haircut for the Dow Jones Industrial Average (DJIA) year over year until the DJIA bottoms at 5,000 to 3,000 points, or the resumption of the bull market in gold with a yearly gain of 30% until it is at least 90% higher than today's prices?
Supposedly the market cap of either IBM or Apple computers is greater than that of all gold stocks in the market. I think this shows that the gold and silver stocks and the precious metals in general have a lot more to grow. DJIA is already down by 23% from its 2007 high of 14,000. In that time gold went from the $700/oz range to today's price of $1662/oz. Also Goldcorp Inc. moved from $24/share to its current price of $46.86/share compared to IBM which has stayed relatively the same in price moving up by 54% from $109.00 in 2007 to $167.68 today.
This shows that the growth in the market cap of IBM has not kept pace with that of Goldcorp Inc. The general idea is that gold stocks could have a 400-500% gain if gold doubles in price. This could possibly happen over the next three years. I don't think the growth in blue chip stocks such as IBM could match these gains.
Worldly Trader said:
"...I do feel that special interests are doing all they can to knock down the resource stocks..."
Its like we have handed over world control to the Martians since no one seems to know exactly who these nebulous entities are!
Hey Vince....LOL
I thought I had a bug on my screen
looking at the Kingsman header on your blog
Vince will probably be giving his Rocky Marciano punching bag a good workout this weekend.
Someone got me on the bug a while back - I tried to squish the little bugger on my screen LOL - Just playing it forward :)
I missed these mergers. Agnico closed a deal on September 19th to buy Grayd Resources 9GYD) for $275 million which is $2.80/share a 44% percent premium to Grayd's share price of $1.95 on September 19th. The full Reuters report on the merger is here http://ca.reuters.com/article/businessNews/idCATRE78I48Q20110919
Last month on August 29th, AuRico Gold offered to buy NorthGate Minerals for $1.6 billion in a stock based purchase. The Globe and Mail did a report on the merger and it is here http://www.theglobeandmail.com/globe-investor/aurico-scoops-up-northgate-minerals/article2145438/
I have put a few highlights from the article down below:
AuRico Gold Inc. (AUQ-T9.88----%) has struck a friendly deal to take over Northgate Minerals Corp. (NGX-T3.440.030.88%) for $1.46-billion as part of its strategy to expand production in times of record-breaking gold prices.
"The all-stock deal, which some investors described as rich, breaks up a previous agreement Northgate made in July to buy Primero Mining Corp. for $370 million and vaults AuRico to intermediate gold producer status alongside such peers as Osisko Mining Corp. and New Gold Inc. "
"The transaction sees Mexican-focused AuRico, known until recently as Gammon Gold Inc., pick up new mines in Canada and Australia to help it increase production by more than 50 per cent to 730,000 ounces by 2013."
"The deal comes four months after AuRico bought Capital Gold Corp. for $420 million."
I think despite the short term panics most investors should on to their quality junior and mining stocks. Over the long term demand will remain high for gold and other commodities despite any short term dips we see in the market.
My brother who is a financial advisor bought his first gold stock last week and that was.........AuRico.
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