In a moment, I'm going to share with you where I think you can acquire exposure to precious metals essentially for free. But first, let's dive into one new development that yields the first of five opportunities I will outline below.
"We wants it, we needs it. Must have the precious!"
Like Tolkien's gold hoarder Gollum, New Gold (ASE: NGD) wants to keep its precious all to itself.
But there's no split personality evident in the management of this golden growth sensation. New Gold has remained intently focused upon accelerated development of the Blackwater deposit in British Columbia from the moment they acquired the asset back in April. The $567 million transaction to acquire prior owner Richfield Ventures gave New Gold a nearly complete stake in the project, but this week the company made it clear it will settle for nothing less than 100% ownership of this rapidly expanding gold zone.
You see, just days before New Gold made its play for the Blackwater project, Richfield inked a joint venture agreement with fellow junior explorer Silver Quest Resources (OTC: SQIFF), granting Silver Quest a 25% stake in the northern portion of the project area. As New Gold's aggressive $20 million drilling program on the project for 2011 yielded substantial expansion of the deposits, Silver Quest saw its share of the resource grow to 0.56 million ounces of gold resource in the indicated category. Likely in anticipation of further expansion to come, New Gold opted to consolidate its interest this week with an all-stock bid for Silver Quest valued at about $121 million. Following this consolidation, New Gold's 30% stake in Goldcorp's (NYS: GG) El Morro project becomes the company's only major development asset that is not wholly owned.
Gold for free?
Incidentally, Fools who enjoy receiving free exposure to gold and silver may wish to take a timely look at Silver Quest. The shares jumped, after Monday's announcement, to roughly the implied value of the assets that will transfer to New Gold (Silver Quest's 25% stake in the northern portion of Blackwater, plus another British Columbia exploration project called Capoose). However, in addition to New Gold shares, Silver Quest shareholders will retain a stake in the company's remaining exploration properties through a newly created "SpinCo." Starting out with roughly $15 million in cash, a 9.9% stake held by New Gold, and an array of promising exploration targets in British Columbia and the Yukon Territories, Silver Quest may yet warrant some attention as a means of acquiring New Gold shares along with what amounts to a free and precious bonus.
Even as folks continue to muse about how expensive gold may seem at prevailing prices, I find it astounding the number of means by which crafty investors can acquire access to gold and silver assets essentially for free.
Paramount Gold & Silver (ASE: PZG) continues to trade at such a discount to fair value for its Sleeper project in Nevada, that acquiring shares at these levels is akin to grabbing a stake in the company's 1 million ounces of gold and 74.6 million ounces of silver at its San Miguel project for free! Brigus Gold (ASE: BRD) shares have now dipped to such a ludicrous valuation for its 1.92 million ounces in existing reserves, the market is essentially offering exposure to the miner's exciting Contact Zone and 147 Zone deposits within the existing mine complex at no extra charge.
With Taseko Mines (ASE: TGB) trading beneath fair value for its flagship Gibraltar copper and molybdenum mine, those shares basically imply free exposure to a potential world-class niobium deposit and the company's controversial New Prosperity copper gold project. And finally, molybdenum producer Thompson Creek Metals (NYS: TC) has tumbled its way to an impaired share valuation that could be seen to present the company's looming Mt. Milligan copper and gold mine at no extra charge.
Add New Gold to My Watchlist.
Add Goldcorp to My Watchlist.
Add Paramount Gold & Silver to My Watchlist.
Add Brigus Gold to My Watchlist.
Add Taseko Mines to My Watchlist.
Add Thompson Creek Metals to My Watchlist.
At the time thisarticle was published Fool contributorChristopher Barkercan be foundblogging activelyand acting Foolishly within the CAPS community under the usernameTMFSinchiruna. Hetweets. He owns shares of all the companies listed in this article: Brigus Gold, Goldcorp, New Gold, Paramount Gold & Silver, Silver Quest Resources, Taseko Mines, and Thompson Creek Metals. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool'sdisclosure policyis older and wiser than Gandalf the Grey.
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