By Byron King
This post A New Standard in Gold Mining appeared first on Daily Reckoning.
Big news just broke in the gold sector.
The story originated from industry bellwether Goldcorp. It involves a relatively complex set of mergers and business associations, but the bottom line is that a new bar has been set for how the gold mining industry works.
I believe that this new trend will affect the entire precious metal sector, from large mining concerns down to small juniors. Things are looking up for mining companies and their shareholders.
Here’s the story: Last month, Goldcorp announced that it entered an agreement with Barrick Gold to develop a major, new gold-bearing mineral district called Maricunga. This area is located in the super-high, very dry Atacama Region of northern Chile.
Why is this important? Begin with three points:
This deal is a major step for Goldcorp — entering Chile, taking the lead from Barrick and developing a vast, new precious metal district
The deal marks a major teaming and risk sharing arrangement between Goldcorp and Barrick
The deal sets a new bar for future merger and acquisition (M&A) activity within the mining space — paving the way for more of this style of M&A action with major companies, intermediates and juniors.
Goldcorp and Barrick — two elephants in the gold mining space — will set up a 50/50 joint venture to develop a string of projects in the heart of the Maricunga gold belt. This area is one of the world’s largest undeveloped gold districts.
The joint venture aspect of this deal alone is important. Two big guys are laying down their corporate credibility, and sprinkling their holy water, so to speak, onto a nearly undeveloped mining patch. It’s a sign that the Mining Zombie Apocalypse of the past five years is truly ending.
This Chile play is a structured deal with many layers. It begins with Goldcorp buying a 25% share in a project called Cerro Casale from Barrick, Goldcorp is also picking up another 25% stake in this project from Kinross Gold. This gives Goldcorp its “50,” and leaves Barrick with “50.”
The project itself holds eye-watering levels of gold, silver and copper — over 23 million ounces of gold, just shy 6 billion pounds of copper, and beaucoup silver. That’s a heck of a lot of metal! Right away, you can see that this is a game-changer for Goldcorp. It doesn’t just move the proverbial needle. It adds an entire new gas tank.
In addition to the Kinross and Barrick buys to obtain 50% of Cerro Casale, Goldcorp is using its own shares to fund a separate $185 million deal. It’s buying a well-regarded, junior explorer-developer named Exeter Resource Corp. Exeter controls a site called Caspiche, which is also located in the Maricunga belt, about 6 miles north of Cerro Casale.
Caspiche also offers incredible levels of precious metal — about 24 million ounces of gold, 54 million ounces of silver and over 5 billion pounds of copper (although these …read more
Source:: Daily Reckoning feed
The post A New Standard in Gold Mining appeared first on Junior Mining Analyst.