Is the Gold Bull Market Over?

Agnico Eagle (AEM/T) doesn’t think so. In the past two months, Agnico, which incidentally is one of my favourite gold mining companies, has shelled out $54 billion to buy somewhere between ten and fifteen percent of four junior precious metals companies-Sulliden Gold Corp(SUE/T), Kooteny Silver Inc. (KTN/V), Probe Mines (PRB/V), Atac Resources (ATC/V), and to buy outright a fifth company, Urastar Gold Corp (URS/V) .

“The message from Agnico’s recent chain of acquisitions is compelling. It seems there are quality assets to be had, and cheap, a dream situation for any well financed gold miner looking to replenish its ever declining inventory of minable gold.” Sean Silcoff, The Globe and Mail, May 28, 2013.

Returning to the Globe and Mail article quoted above-“National Bank Financial analyst Steve Parsons expects others (companies) will be following Agnico’s example.” This analyst believes that the prospective buyers should be looking to buy mid-sized exploration companies with sufficiently large deposits or the prospects of making a deposit large enough for profitable and long term mining, which require financing and don’t currently have strategic backing. In addition Mr. Parsons believes that “the projects must have high enough grades, scalability and low enough capital and development costs to keep costs low and returns high.” “Let’s not forget two other ingredients: Experienced management and projects that are located in friendly jurisdictions that aren’t trying to change the rules in a fit of resource nationalism.”

I might say that Agnico’s strategy in this regard should also be employed by well heeled investors. They should follow Mr. Parson’s excellent advice with regards to selecting appropriate junior precious metals mining stocks.

Virtually all our accounts (mine, my wife’s and our business) are invested in the precious metals juniors. A significant portion is invested in Barkerville Gold Mines. This company has now been in a cease traded situation by the BCSC for better than nine months, because the gold discovery outlined by Geox in a 43-101 was, to all intents and purposes, too large for the BCSC to accept. I won’t go into this hiatus at this time, but believe-you-me when the CTO has been lifted, I will come out with all guns blazing. In the meantime our investment in Barkerville is dead money and cannot be put to use buying shares in some outrageously underpriced junior precious metals mining companies.