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TGR: Are many of these companies still around?
QH: Not surprisingly, most major gold producers have roots in these "gold rush" periods. Although there were miners that found their start during the "white" periods, most of these are no longer around, likely because they were gobbled up in the subsequent frenzy. It will be interesting to see what happens to up-and-coming producers like Osisko Mining Corp. (OSK:TSX), Alamos Gold Inc. (AGI:TSX), and Allied Nevada Gold Corp. (ANV:TSX; ANV:NYSE.A) over the next few years-do they get bought or survive through acquisitions?
TGR: What comes next?
QH: If the next few years play out as I think, we could be approaching a pivot point, one that ushers in the next gold rush. Given current market conditions this may sound crazy, but we could soon see a massive inflow of money similar to what occurred when gold last peaked.
Such a capital influx will likely accompany a sharp run-up in gold prices. Euphoria over gold, although likely short-lived, will pull in speculative money fleeing other sectors that are losing value. This influx of money will likely feed the next cycle of discoveries and acquisitions as it did in the early 1980s.
Again, I don 't know when this pivot point might occur. It could be a month from now, six months, a year or two years. The significance of the cycles is that legitimately profitable deposits will be highly sought after as we roll into the next "up" cycle for gold acquisitions and exploration.
Some 2,000 junior exploration companies are struggling to survive right now. They universally claim to be cheap and in possession of stellar projects. Some actually are cheap and a few do own above average projects. It is our conviction here at Exploration Insights that the few companies holding exceptional properties and deposits will outperform the general junior market and be the target of larger mining company growth strategy. It is our intention to own some of these.
TGR: How can an individual investor know which companies are worth owning?
QH: We need to be positioned for this turnaround; specifically we need to understand what a major company is after and how it makes its acquisition decisions. This is something both Brent Cook and I are experienced with and have been involved in while working for major mining companies. There is much more to it than a good drill hole or reading a third party preliminary economic assessment. The resource has to be evaluated in the context of mining, operating and capital costs. Furthermore, location, existing infrastructure, jurisdiction, sociopolitical realities and environmental issues need to be factored into the price a major can afford to pay for a mineral deposit. But rest assured, if history is any guide, a turnaround is coming.
TGR: Thank you for your insights.
Dr. Quinton Hennigh recently joined Exploration Insights where he provides geological expertise reviewing companies, projects and activity in the junior mining space. He began his career as an economic geologist with large mining companies including Newmont Mining Corp., Newcrest Mining, and Homestake Mining where for fifteen years, he managed exploration projects in North America, Europe, Australia, Asia, and South America. In 2007, he joined the junior gold sector where he has held executive and advisory roles at Gold Canyon Resources, Novo Resources Corporation, Euromax Resources, Prosperity Goldfields and Evolving Gold Corp. He earned a Master of Science degree and a Ph.D in geology and geochemistry from the Colorado School of Mines in 1993 and 1996, respectively.
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1. The following companies mentioned in the interview are sponsors of The Gold Report: Gold Fields Ltd., Allied Nevada Gold Corp. Streetwise Reports does not accept stock in exchange for services. Stories are edited for clarity.
2. Quinton Hennigh: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise for participating in this story.
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