Mining for Winners in Any Market

Posts Tagged ‘fronteer gold frg’

, , , ,

Fronteer Gold (FRG) Continues To Expand Long Canyon

In Market Analysis, Stock Movers on December 23, 2010 at 4:35 pm

Get a FREE 30-Day Trial of my Members-Only Premium Stock Analysis Service NOW!

There is a growing scarcity of available precious metal mines in the world. The old majors such as Barrick (ABX), Goldcorp (GG), and Newmont Mining (NEM) are facing diminishing reserves in their existing mines. They are mature miners and their pockets are bulging with cheap dollars. Moreover, these majors are competing with the Chinese, Russians, Japanese, and Koreans who have all shown an interest in expanding their precious metals assets and diverting assets away from paper currencies into real assets. All of them know it is cheaper to buy growth rather than to find it; they’re like the Red Queen in Alice in Wonderland who must take two steps forward just to stay in the same place.

Sitting on cash and not converting it into resource growth can be deadly for a large company in this ebullient precious metals market. Many ponder why precious metal prices are rising, yet many majors are sitting on their laurels afraid to make the plunge to acquire projects. This has led many institutional investors and mutual funds to flock to the smaller explorers who are delivering the consistent results to the market that characterize growth. Many of the developers have underperformed, and this certainly has been an explorer’s market. I don’t have to work hard to prove this point.

The small miners have been significantly outperforming the large-cap mining companies. Investors are looking for resource expansion and growth. Many top companies are leaner and stronger with far superior assets than they were in 2007. Companies are able to expand developing discoveries at lower costs due to the weak economy and cheaper oil. Remember back in 2007, oil was up to $140 a gallon? Now costs are more inexpensive and precious metal prices are significantly higher. The operating margins have significantly improved. Some of these potential projects that were once marginal are gaining more interest as the high price of precious metals is improving the project economics of marginal projects. Now the question is who will be acquired. The best way to figure that out is to screen for the best mining companies using both a fundamental and technical approach.

I believe companies will acquire and invest in juniors due to fears of further bailouts in Europe and currency devaluations in the United States during 2010. Several US states are on the verge of bankruptcy. France is in danger of losing its triple-A credit rating and many European sovereigns have already been downgraded. The reaction to debt issues have been radical moves from central banks and governments to print and inflate asset prices at any cost. Deficits are soaring and investors are flocking to junior mining stocks. Many high-quality juniors have just recently made moves and are just beginning to return to pre-credit-crisis highs. If the majors do not act soon, many of these high-quality, high-grade projects will be swallowed up from the international demand for hard and real money. There are very few high-quality projects with production potential that suit the needs of majors. The majors are growing increasingly compelled to scour the planet for eligible deposits. The gold price has advanced over 25% this year, silver is up over 50%, and investors are curious as to which major will make the next deal. Discovery rates are dropping and there are a lack of viable low-risk deposits for a major. Faced with the prospect of declining profit margins and depleting mines, the majors must speed up the pace of seeking M&A activity. Such a search is not without risks. Venturing into foreign lands, dealing with unstable governments, operating in the midst of drug cartels and well-armed bandits, they pay top dollars for blue-sky potential in safe jurisdictions and close to infrastructure. Yet there are high-quality mines in the United States, especially in Nevada, that have been overlooked.

In 2010, majors began making moves that gave hefty premiums for blue-sky potential and high-grade assets. Recently the acquisition of Andean Resources by Goldcorp demonstrated how confident the Goldcorp team feels in the potential upside of the Cerro Negro project. Investors looking to make money in the mining sector should study similar projects that have all the criteria that majors are paying top dollar for. The Cerro Negro project has high-grade exploration upside, low cash costs, and blue-sky potential in a mining-friendly jurisdiction.

In their urge to merge, these majors are overlooking suitable prospects in their own backyards. Here, in the safer, stabler turf of the United States, there are hosts of friendly candidates waiting to be acquired. One candidate which I have informed my readers about for several months is Fronteer Gold (FRG).

Fronteer has a huge land position in Nevada, second only to Newmont, and is consistently announcing high-grade results from its 100%-owned Long Canyon Mine. It has been impressing the markets by expanding the mineralization to the northeast, and in its last press release it showed high-grade mineralization to the west. This is demonstrating to the mining community what an incredible deposit this is becoming and how it is open in multiple directions.

The recent results also validate Fronteer’s move to acquire Auex Ventures in order to take 100% control of this asset. Fronteer has not just discovered a mine, it’s discovered a whole new trend in a mining-friendly jurisdiction near infrastructure. This mine has the potential to get huge. Drilling results are continuing to expand high-grade intersections of around 10 grams per ton. Now,with the recent transaction this past week of its Michelin Uranium Deposit, Fronteer is in a strong cash position and is the largest shareholder of Paladin Energy, a world-class uranium miner. This provides Fronteer with liquidity. At any time it can raise money through selling shares and not diluting shareholders to build its gold discoveries.

Paladin is the eighth-largest producer of uranium with a pipeline of uranium projects and is in a strong financial position. This is an investment for shareholders who believe we’re in the beginning of a uranium bull market. I believe in a couple of years the price of uranium will move much higher, placing Fronteer in a financial position to build world-class gold mines without needing financing or diluting shareholders. It also gives a concrete value to any potential suitor in case it should want to purchase Fronteer. Fronteer’s books have about $120 million of cash and around $250 million of Paladin Energy, an impressive balance sheet for an emerging-mine developer.

, , , , , , , , , , ,

Breakout in Precious Metals, Pay Attention to High Quality Explorers

In Market Analysis on August 31, 2010 at 6:38 pm

The global debt crisis and the war on deflation by the Federal Reserve is causing precious metals to approach a key resistance level.  Gold is nearing a 52 week high while silver is close to breaking $19.  A break above these levels on high volume could be the beginning of a major move higher.

Gold and silver has been a safe haven asset.  Many concerns were expressed if miners would collapse in a weak equity market.  However, since the last Federal Reserve meeting, gold and silver has shown impressive relative strength compared to the overall market. The Federal Reserve discussed the increase of treasury purchases to keep interest rates artificially low. They also made it clear that every attempt will be made to prevent deflation.  This low interest rate environment and weak economic outlook which may continue for some time has encouraged investors to move money out of equities into safe haven assets such as gold and silver.  Gold and silver is also gaining interest as investors are realizing bond yields are too low and may be risky at these level.

The Fed’s greatest fear is deflation, high unemployment and a move into new lows in equities before the election.  If the S&P continues to deteriorate and unemployment data comes in negative, I expect an announcement of more central bank interventions to reflate the economy.  This next round of quantitative easing could cause a massive rush into gold and silver.

Many are concerned of the safety of fiat currencies during a global debt crisis.  The global economy is built on spending and investing.  Many investors were concerned if a downturn in the equity market would drag down junior miners.  These past couple of weeks have proved that is not the case.  Junior miners have made major moves higher.  A breakout into new 52 week highs in the miners is highly probable especially as the price of bullion breaks out.

The saucer (cup) and handle pattern is the chart reader’s favorite pattern.  Great performing stocks tend to have a strong base before an extended move.  Gold’s (GLD) pattern is very rare and this setup tends to be very profitable.  Similarly to what we saw in September of 2009, I expect a major breakout.  Is this pattern showing investors that a major event may be brewing?  Time usually tells the tale as news or events are announced after the breakout.

High quality gold and silver explorers are making major moves already.  It is important to pay attention to the gold and silver junior miner sector as we may be setting up for peak gold and silver.  High quality explorers with mineable assets should be followed as gold and silver discoveries are rare and producers are paying a premium for these properties.  These miners tend to have great leverage to the price of bullion especially if we see more government interventions and quantitative easing.

Yesterday, Fronteer Gold, a stock that I have recommended to my readers bought out Auex Ventures to control completely the Long Canyon Project.  The Long Canyon discovery is high grade and open pit. Fronteer is consistently coming out with impressive results from this project.  Long Canyon represents continued resource growth as it is expanding and open in all directions.

A major move in bullion could cause these explorers to make large percentage gains.  If you haven’t researched high quality junior miners yet, now is the time before a major move.

Disclosure: Long Gold and Silver Miners

, , , , , , , , , , ,

Market Fails as Fronteer (FRG) Jumps On Long Canyon Discovery

In Stock Movers on August 19, 2010 at 8:41 pm

The S&P 500 broke out of a bearish rising wedge pattern last week after failing to hold the 200 day moving average four different times.    My bearish views were confirmed last week with a high volume breakdown after the Federal Reserve gave a sour report on the state of the economy.  Trading became highly volatile before the announcement.  In previously published articles, I warned that the Fed would ease and do everything within their power to flood the markets with cash, which has been bullish for gold and mining stocks.  The several gap downs on the S&P are hard to short as the market may rally to try to fill those gaps.    Although I have downside targets, I would look for a countertrend days to enter if going short.

Today’s break of the 50 day moving average was a key move as the probability of the 50 day moving average to cross the 200 day moving average to the upside is diminished.  Many were concerned that the bearish death cross would be a whipsaw, meaning markets would revert higher.  However, the bearish death cross is becoming more confirmed and pronounced as the 200 day begins sloping over.

Stocks key technical break today of the 50 day moving average on high volume shows there is little support as the risk appetite wanes.  The rally in treasuries are showing signs of a double deflationary dip, similar to the 2008 bear market as investors fear that the economy is on shaky grounds.

I believe that the chances of S&P moving into new lows are very high.   Today’s break of the 50 day moving average is confirming both the bearish head and shoulders pattern and death cross.

The S&P market action is demonstrating that the two day rally above the 50 day was not strong enough to maintain support.  Now the 50 day will once act again as resistance.  Volume did come in higher signaling major distribution. However, when a market transitions from a bull to a bear, each subsequent failure at the 200 day drives out the bulls who still believe that the decline is a buying opportunity.  After the third or fourth failure usually a full blown bear market begins.

Despite the Fed’s promise to amp up the struggling recovery by flooding the markets with cash and the latest jobs bill from Congress benefiting government and union employees, their major constituents, investors are losing confidence in Washington’s attempt to prevent another bear market.  I expect a breakdown into new lows over the next few weeks.

Despite all the weakness in the equities market, many mining stocks I am following closely are breaking out as gold is on its way to test new high territory.

Fronteer Gold which I have highlighted to my subscribers came out with their best drill results yet at their Long Canyon Project.  This project is being viewed as one of the great new high grade gold discoveries in Nevada.  These results in Nevada will be part of a new resource estimate on this project which should be a driving force for this company over the next few months.