Juniors Benefit from Competition Amongst Major Gold Companies

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With bullion process hovering around near record levels, senior global gold miners are on prowl, competing amongst each other for established and emerging projects containing gold, copper and silver.

The world’s largest gold producer, Barrick Gold Corp. and other large miners are pursuing copper-gold projects and gold-silver projects, as pure gold plays become scarce, said Barrick spokesman Vincent Borg. “The reality is the world is pretty much explored in terms of pure gold deposits, so what people are looking for today are called gold- copper porphyries, where the copper comes with the gold, or multi- mineral deposits,” he said.

Last week, Goldcorp Inc. entered into the midst of Barrick’s deal to buy mining giant Xstrata PLC’s 70 per cent share of the El Morro Chilean copper-gold project. Goldcorp made an arrangement with New Gold, which owns the other 30 per cent of the project, with US$463 million to exercise their first, right of refusal and buy out Xstrata’s stake in the project, then sell Goldcorp a 70 per cent interest. Barrick may still return to the fray by making another bid for the El Morro project. Goldcorp’s actions follow on the heels of a successful bidding war with Minera Penmont for control of Canplats Resources Corp.’s Camino Rojo gold and silver discovery in Mexico.

Andre Hidi, head of global mergers and acquisitions at BMO Capital Markets, predicted an acceleration of M&A activity in the mining sector throughout 2010. Scotiabank vice-president and commodities specialist Patricia Mohr commented that because the potential for new gold projects is limited, large companies are keen to acquire projects from junior miners, which is often the most cost-effective way of doing business for both players. Though seniors are seeking large gold deposits, there are also seeking them to be located jurisdictions such as Chile and Mexico, which are perceived to be friendly towards mining.

To help position themselves to aggressively pursue acquisitions, senior producers are also rationalizing their portfolios, both to focus on larger projects and in the case of Teck Resources Limited, to reduce debt obligations. This allows opportunities for junior companies to pick up attractive assets.

Newstrike Capital Inc. announced it has entered into an agreement to acquire 21.2% of the Morelos Project from of Goldcorp. Earlier, Gleichen Resources had acquired the acquisition of 78.8% of the Morelos Project from Teck. The Morelos Project is located in the Guerrero Gold Belt (“GBB”) in the State of Guerrero, Mexico, north of Acapulco City. The GGB today has an inventory of over 12 million ounces of gold. Newstrike’s management team was instrumental in the discovery of over eight million of those gold ounces. This inventory continues to increase with ongoing exploration and mine development by all participants currently active in the area. In addition to the  proposed acquisition from Goldcorp, Newstrike control the largest land position in the GGB, a 100% interest in 81,330.04 contiguous hectares.

Source: Winnipeg Free Press

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