Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Eiro-group Review –The power of trading education - 4th Dec 20
Early Investors set to win big as FDA fast-tracks this ancient medicine - 3rd Dec 20
New PC System Switch On, Where's Windows 10 Licence Key? Overclockers UK OEM Review (5) - 3rd Dec 20
Poundland Budget Christmas Decorations Shopping 2020 to Beat the Corona Economic Depression - 3rd Dec 20
What is the right type of insurance for you, and how do you find it? - 3rd Dec 20
What Are the 3 Stocks That Will Benefit from Covid-19? - 3rd Dec 20
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Merger and Acquisitions Area Play Driving Resource Stocks

Commodities / Resources Investing Sep 24, 2010 - 01:59 AM GMT

By: HRA_Advisory


Best Financial Markets Analysis ArticleThe US unemployment numbers that came out on the day before last summer long weekend were less bad than expected.  Or so the markets indicated until ISM manufacturing data in the afternoon cooled enthusiasm some.  It had been good Australian and Chinese manufacturing data that turned market sentiment earlier in the week.  Arguably the most interesting bit of news had been 100 km long traffic halts in China of coal trucks trying to make deliveries to power plants. More infrastructure gains are obviously needed to keep China growing. 

Augusts’ chagrin was about some sovereign debt that was excluded from the Euro-zone stress tests, but that has quickly become a Continental issue.  To borrow one weather related phrase “if you don’t like the market we’re in just wait 10 minutes”.  Volatility in the equities space continues to be balanced by incremental gains for bonds, and uncertainty from everyone else about how to focus.  However, recent relative strength metals underscore where wealth is being stored.

It is still impossible to get a proper gauge of how the direction the market’s psychology is going to turn.  That is usually done by looking at leaders for a cue.  But, who leads when capital hides under low yield government paper fearing a resumed Debt Crunch?  Being wrong has become less acceptable than being decisive.  At least in the West.  In China and other BRIC domains even the lower paid cadres are increasingly proclaiming their views of what is right.  Perhaps that what’s being reflected by our favorite neutral leader these days?   

The three-city copper warehouse stocks continue to decline while the red metal’s price shifts higher against the greenback.  That is a normal pattern if you’re looking for signals of continued growth.  There has been somewhat less mine supply than expected which aids the price gains, but copper’s price rarely gains unless the “invisible hand’s” signal is a thumbs up from the consumption side.  More clear is the desire to own precious metals, and their related equities.    

Although the move into gold has its usual measured pace, the evidence of a growing gold boom is very much there.  The senior producers are signaling it with take-over activity, and the juniors are showing it with an unquestionable zip in their markets.   The same holds for silver which has now all but made up the declines since its pre Crunch run in February ’08.  Silver will soon toy with breaking through the ‘08 high while gold continues to butt against its all time price high from this past June.  The yellow metal is increasingly news worthy on a number of fronts.  

Even though we don’t get the direct benefits we had with its move on Virginia, we none the less think we owe Goldcorp some beers for its Andean Resources (AND-T) bid.  G laid out an eye popping +$3.5 billion bid for Andean to overcome a $3 billion bid from Eldorado Gold (ELD-T) that had looked like a show stopper to us.  There is head scratching over the seemingly high cost of what is on the table, but this meal has multiple courses.

Despite being at opposite ends of the western hemisphere, the bids for Virginia and for Andean tie together at the level of being about the potential of a mineralized system rather than about currently defined ounces. In fact Virginia didn't have any defined ounces (at least not in the official NI43-101 sense) at Eleanor when Goldcorp made its move.  Some considered that bid crazy at the time, but now, with over 9 million gold oz defined to date; it is coming in at less than $50 per oz.  That looks good even using the sub $400/oz gold price at the time the bid was made.  It is much lower than the cost to find new ounces now even after factoring in Goldcorp’s project work.  

Goldcorp obviously feels it can outline many more than the current +3 million gold & 60 million silver oz that Andean has already outlined at its Cerro Negro project in southern Argentina.  The move also puts Goldcorp into one of the sector’s strong new discovery districts.  That notion brought volume into Minera Andes (MAI-T) and Mirasol (MRZ-V) which both have ground near AND in addition to their own focus holdings. 

This came after a much larger bid by Kinross (K-T; KGC-N) for Red Back Mining (RBI-T) which produces and explorers for the yellow metal in West Africa.  Here again the bid valuation was much larger than would justified by the existing resource base.   The target is ongoing exploration at the Tasiast project in Mauritania that some subscribers may recall as a Eurozinc Mining holding before Lundin acquired it.    

The Underworld Resources takeover earlier this year was similarly about mid tier producer Kinross Gold (K-T) wanting in on an exploration play and not simply an existing resource base. 

In that case K did have a leg up with an existing low cost equity position in UW.  That was important more because it ensured it was focused on what Underworld was doing rather than because it reduced the acquisition cost.  It too expects, or at least hopes, to show a low per oz acquisition cost in the new White Gold district once it turns the exploration drills off.

There are rumors that the likes of Barrick Gold are sniffing around the Yukon.  Nice to hear, but actually we would be more surprised if they weren’t.  Companies the size of Barrick employ more people just to look over projects for potential acquisition than most juniors employ in total.  The scale potential being put on the table there is large, and the deposit types can offer up low costs even in a relatively high cost environment like the Yukon. 

While neither Coffee nor Rau are entirely new concepts for the Yukon, it’s fair to say they haven't been seen there before with this much scale potential gathered into packages.  How much more work and time is needed to sufficiently outline their true scale is now the question.  Both companies have undergone some consolidation after strong price runs.  This is to be expected as we approach the autumn solstice, but that doesn’t mean these two, or others working in the north, are going to sleep.

As outlined further in the updates we consider the work at 3Ace by Northern Tiger to be a third discovery area and deposit type for this play.  While the scale potential is still in question at 3Ace its worth noting the project is on a gravel highway that will now be maintained for the CanTung mine some 40 km distant that is being readied for new output. This is a big leg up in the potential for a smaller high-grade situation to do well.  It also adds to the Yukon as a region that is “in play”.

We do view the Yukon as being a gold based “Area Play”.  That is as much market concept as anything else, and we will continue speaking to it more fully over the next while.  The important point is that new discoveries have prompted a large number of companies to acquire ground for which interest and funding are readily available.  This is generating excitement that supports markets for the lead players and makes markets for others.  However, we have entered a new information age since diamonds in the NWT and nickel in Labrador generated their Area Plays. 

Drill rigs have been fairly easy to come by, but assay labs are getting backlogged again.  That means relevant results will be coming in from Yukon projects through the balance of the year, and perhaps longer.  How much potential will be put on the table by then is still an open question.    Because of regional scale approaches to the work we don't expect anyone to be as far along with conceptual mine planning as Underworld was early this year. 

Volatility is to be expected, and days like KAM just had when decent results are tossed off because they are less strong than the last release will be repeated. That too is part of an Area Play.  However, there is a lot of reporting to come from both the established players and a number who have just started drill programs.  That should maintain interest as gold’s price breaks new ground. 


It’s a secular bull market for metals and resources. We’ve been saying that for nine years. And we’ve been right. Another thing we’ve been right about is the growing importance of the Yukon as an exploration destination and, more recently, Area Play. HRA was there early and continues to follow several of the biggest winners in the play and is tracking dozens of others for potential inclusion in HRA. 

CLICK HERE to access your FREE Yukon Report from HRA now! HRA initiated coverage on 15 companies since early 2009 – the average gain to Sept. 3, 2010 is 257%! 

By David Coffin and Eric Coffin

    David Coffin and Eric Coffin are the editors of the HRA Journal, HRA Dispatch and HRA Special Delivery; a family of publications that are focused on metals exploration, development and production companies. Combined mining industry and market experience of over 50 years has made them among the most trusted independent analysts in the sector since they began publication of The Hard Rock Analyst in 1995. They were among the first to draw attention to the current commodities super cycle and the disastrous effects of massive forward gold hedging backed up by low grade mining in the 1990's. They have generated one of the best track records in the business thanks to decades of experience and contacts throughout the industry that help them get the story to their readers first. Please visit their website at for more information.

    © 2010 Copyright HRA Advisory - 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.

    HRA Advisory Archive

© 2005-2019 - 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

6 Critical Money Making Rules