This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Gold Trends at Denver Gold Forum

Stocks in this article: GG KGC EGO RGLD SLW MFN EXK

DENVER ( TheStreet) --Two trends emerged from the Denver Gold Forum this year as gold prices trade around $1,300 an ounce: more consolidation and overvaluation.

Merger and acquisition activity in the gold mining community is nothing new, but has definitely picked up steam in the past few years as gold prices soared past $1,000 an ounce. Most recently Goldcorp (GG) and Kinross Gold (KGC) bought Andean Resources and Red Back for $3.4 billion and $7.1 billion, respectively.

Although the purchases represented hefty premiums, the large gold companies were forced to replenish their resources as gold demand skyrocketed and supply waned. The above-ground supply of gold has slowly shrunk since 2001, leaving gold producers in a bind.

According to the World Gold Council, mine supply increased only 3% in the second quarter of 2010 while total gold demand rose 36%. The more gold a company produces, the more replacement gold it has to find, and organic growth on a big scale is hard to come by. It can also take 10 years to discover a mine and take it into production, so for a quick fix large companies have to turn to acquisitions.

"The big companies need to replace ounces, and they're only going to do that through acquisitions," argues Mark Bailey, CEO of Minefinders (MFN). "They don't have the patience to go out and make a grass-roots discovery. ... The big sized companies will have to acquire, the mid-sized companies will have to acquire ... as well as smaller companies that want to grow quicker."

Goldcorp paid a 35% premium for Andean Resources in its efforts to outbid Eldorado Gold (EGO) for the company. Andean has indicated resources of 2.54 million ounces of gold. Shareholders will have to wait for the mine to be built before the acquisition will contribute to earnings. CEO Chuck Jeannes is estimating production by late 2012.

Kinross paid a 21% premium for Red Back but will have immediate access to 450,000 ounces of gold from its already producing operations. The acquired West African miner, however, has initial reserve estimates of 25 million ounces.

According to CEO Tye Burt, there is a 36-month plan to put the new mill into production while they are drilling. It will take about a year for Kinross to start adding this new gold to their production.

Burt believes that more senior producers that don't have growth will follow in Kinross' and Goldcorp's footsteps. Projects will most likely be of higher quality and good grade.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs