Major Investors Piling into Gold 32 comments
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Endeavour Financial Corp (TSX:EDV) closed a $100 million equity offering last week, and several other "bought deal" financings point to a strengthening trend: major investors are piling into gold.
The Offering was underwritten by a syndicate co-led by GMP Securities L.P. and Canaccord Capital Corporation (the "Underwriters"). Endeavour will use the funds to support its investment activity in the mining sector with an emphasis in the short term on precious metals.
The first quarter of 2009 has seen well over $1 billion flow into near term and existing mining companies, which is a reflection of the strong gold price amid safe haven demand. With estimates of U.S. government spending reaching as high as $2 trillion, large value investors are increasingly deterred by U.S. Treasury related securities in favour of precious metals.
- Newmont Mining (NYSE:NEM), one of the world's largest gold mining companies, raised US$1.7 billion in a combined common share/convertible debt deal which it will use primarily to fund the acquisition of the remaining 33.33% interest in the Boddington project in Western Australia that it does not already own and the additional capital expenditures that will result from its increased ownership in the Boddington project, as well as for general corporate purposes. Citigroup Global Markets and J.P. Morgan Securities led the placement.
- Freeport McMoran Copper and Gold (NYSE:FCX) raised US$740 million through the issuance of 26.8 million common shares at $28 per share;
- Kinross Gold Corporation (KGC) announced a "bought deal" financing for US$360 through the issuance of 24,035,000 million common shares US$17.25 per common share. The underwriters were led by UBS Securities Canada Inc.;
- Osisko Mining Corporation (OSKFF.PK) entered into another "bought deal" led by Thomas Weisel Partners and BMO Capital Markets. The offering of 77 million units at $CA4.55 a share will gross CA$350.4 million. Osisko is developing the 6.28 million ounce Canadian Malartic Project Quebec.
Smaller deals are becoming more common for junior emerging gold companies as well. Among the recent actions:
- Centamin Egypt (CELTF.PK) raised $CA69 million through the issuance of 106.2 million shares at CA$0.65 per share for development and construction of the Sukari Project in Egypt. This financing was led by Thomas Weisel Partners and Cormark Securities.
- Romarco Minerals Inc. (TSX.V:R) announced a bought deal Friday worth $20 million for the development of the Haile Gold Mine in South Carolina. Romarco issued 54 million units at $0.38 each. The financing was led by a syndicate of underwriters led by Macquarie Capital Markets Canada Ltd. and including Paradigm Capital Inc. and GMP Securities L.P.
- International Tower Hill Mines (THM) sold 2 million common shares at $2.50 per share for gross proceeds of CA$5 million, which will be directed towards further development of its projects in Alaska and Nevada. The placement was a "bought deal" led by a syndicate of underwriters led by Canaccord Capital Corporation and including Genuity Capital Markets and GMP Securities L.P.
- Exeter Resource Corporation (AMEX:XRA) raised CA$25.2 million at $2.40 a share for development of its assets in Argentina and Chile.
And it isn't just gold that is attracting big financing. On February 10th, Uranium One (SXRZF.PK) announced a $270 million investment by a Japanese Consortium comprised of Tokyo Electric Power Company, Incorporated (TKECF.PK), Toshiba Corporation (TOSBF.PK), and The Japan Bank for International Cooperation.
Concurrently with the execution of the subscription agreement, Uranium One has also entered into a long-term off-take agreement and a strategic relationship agreement with the Japanese consortium, both of which will become effective upon closing of the private placement.
The off-take agreement provides the consortium with an option to purchase, on industry-standard terms, up to 20% of Uranium One's available production from assets in respect of which Uranium One has the marketing rights.
Junior Uranium company First Uranium Corp. (FURAF.PK) was also the beneficiary of a bought deal financing led by Macquarie Capital Markets this week, which saw First Uranium place 20.5 million units of its shares at $3.00 per unit for gross proceeds of $61.5 million. First Uranium will direct the funds towards the development of the Ezulwini Mine in South Africa.
Endeavour Financial is followed by many analysts and newsletter writers for its robust project pipeline.
Brien Lundin, who publishes the Gold Newsletter, says one of the main reasons he follows Endeavour Financials is because of management – especially Mr. Frank Giustra. He says this team now senses a market bottom, as they are raising capital to go after assets that now cost a fraction of what they did last year, or even six months ago. He intimates strongly that his subscribers should do the same, using Endeavour as their proxy. A mix of entrepreneurial expertise and value investing, he outlines what the smart money is doing now.
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This article has 32 comments:
On Feb 15 08:18 AM Alan Brochstein wrote:
> There's an old adage: Feed the pigs when they are at the trough...
Come to think of it, "antidotal" may be a better term. Good information on trends can cure certain potential "afflictions". :-)
Obsessive/compulsive disorders aside, ;-), I'm more afraid that a continued downward spiral will depress the price of AU and related PMs. However, if the "stimulus" begins to take hold and the expected inflation scenario begans to bloom, *then* I would expect all the AU and related PMs (not to mention all the other valuable commodities) to take off like a roman candle.
OTOH: if the rumors of large acquisitions by certain government banking institutions are right, it may not matter what the economy does. But there are also rumors of artificial suppression of prices by similar institutions.
I read all this as "run the price up, sell for profit and then drive the price back down". Rinse, repeat as desired.
Timing is the key, IMO
HardToLove
On Feb 15 01:12 PM Ian R. Campbell wrote:
> As a result of my involvement in the development of StockResearchPortal.co...
> I am in constant contact with Presidents of Canadian Listed Mining
> and Oil & Gas companies. I have little doubt, based on the antidotal
> evidence available to me, that in the past few weeks capital has
> freed up for what are perceived to be good (particularly ‘gold related’)
> precious metals companies. If the U.S. economy continues in the
> next few months on a downward spiral – and it seems to me that currently
> is the most likely scenario – I think this is likely to put upward
> pressure on the share prices of a select group of gold explorers
> and producers. I think this even more likely if the price of gold
> continues to increase through 2009.
Citigroup Global Markets and J.P. Morgan Securities led the placement. "
It tells me that major gold companies have no problems raising money.
These 2 probably smell something good.
On Feb 16 08:54 AM CLH wrote:
> After an eight year bull, I sold my gold stocks in March 2008. One
> year later gold has not moved. I dont like dead money.
Disclosure long gold....first time ever.
On Feb 16 02:33 PM Stone Fox Capital wrote:
> If everybody is piling into gold, why hasn't it soared to new highs?
> All the talking heads on TV are bullish about it, yet the price just
> recently began moving. Somebody must've been selling or maybe it
> was forced selling by hedge funds that kept the price down until
> recently. Regardless, its concerning when everybody is so bullish.
> Starting to be a crowded trade.
SA needs an exterminator to get rid of these nasty gold bugs.
On Feb 16 04:00 PM Borscht wrote:
> Piling on the bullshit, one billion invested in the first quarter
> is not a lot of money. I don't like your choice of phrases and would
> prefer more realistic phrases like, decided to invest, opened a position,
> added to positions, crept into gold or crawled into a new gold position.
> The numbers you give certainly don't indicate "piling into."
> SA needs an exterminator to get rid of these nasty gold bugs.
Note also that the "dead money" invested in gold in 2008 gained 5.8%.
The stampede to gold is just beginning.
Credit was awarded against overvalued property and then the bundled debt obligations became chits in leveraged gambles that have gone terribly wrong. Given the uncertainty the flight to gold seems to make sense. It is one of the few assets that will not go to zero.
Right now I like certain overseas markets (Canada, Australia and Singapore), I like a few short positions in the U.S. and I like being long on gold. I'd rather be in a world where I was buying tech stocks, blue chips and real estate but that's not the world in which I live right now. I'd like to believe in the U.S. Dollar, that banks are going to recover and do everything right from now on and that employment will pick up with the stimulus but my rational mind is not seeing it.
I remain open to well buttressed, reality based arguments that I'm being too pessimistic.
On Feb 16 04:51 PM bosun.j wrote:
> The only thing worse than a gold bug is a dollar bug. IMHO.
As someone mentioned, it's the timing that's important. This early in the pump and dump cycle though, I think it's still a good idea to be buying. Too bad I lost all my money in stocks!
:(
Hopefully, Mr. Brochstein and others who are infected with the financial insanity virus will do some reading of quality articles. People who followed the free advice in my article(s) should be sitting pretty and I have received several comments from various readers to that effect. I suppose the contrast is good though. That is what As and Fs were for, right?
seekingalpha.com/artic...
On Feb 15 11:36 AM John Polomny wrote:
> Poor Alan wrote an article on folding on gold back on 8 Dec 08 here
> on Seeking Alpha. In the meantime the gold price has continued to
> advance. I am now adding Mr. Brochstein to my list of reverse barometers.
> When he turns bullish on gold then I will think of selling.
>
>
> On Feb 15 08:18 AM Alan Brochstein wrote:
On Feb 16 08:54 AM CLH wrote:
> After an eight year bull, I sold my gold stocks in March 2008. One
> year later gold has not moved. I dont like dead money.
I work by the hour consulting institutional clients. Why would you think I can't make money favoring or disfavoring ANY investment idea? My clients don't pay me anything except for advice. I am not an investment advisor, I don't sell securities, I run my business as transparently as possible. Instead of spending your time attacking those with whom you disagree, why don't you really seek out the truth as you claim to do?
On Feb 16 06:45 AM bosun.j wrote:
> Alan doesn't like gold because he can't earn a fee from it. IMHO.
>