It may be the lazy days of summer, but investment in junior mining companies has been picking up, making for very un-lazy days for those in the gold mining industry. A recent article published by The Financial Post stated that gold miners have invested $290 million in exploration companies during the first six months of 2017, the highest level recorded in the past decade, and double the value invested in the previous two years combined, according to a CIBC World Markets Inc. report released Wednesday. The article further stated that over 50% of the equity raised by junior gold mining stocks has been through direct investment rather than through fund placement, when historically direct investment has never exceed 20%.
Even as analysts in the commodity sector anticipate an increase in production by gold companies, the pressure is already on to develop new sources in order to meet future demand. This is shining the spotlight on junior mining and exploration companies, as the typical cycle from exploration to discovery to production of gold is about 10 years.
Within the last month Eldorado Gold Corporation (TSX: ELD)(NYSE: EGO) purchased Integra Gold Corp (TSX: ICG, OTCQX: ICGQF), a junior mining company in the Val d’Or region of Quebec. The relatively small Triangle Zone property owned by Integra was acquired for $590 million, which has caused a ripple effect in the productive mining zone of the Val d’Or.
Alexandria Minerals Corp (OTC: ALXDF, CNDX: AZX.V), a Toronto based junior mining company with significant properties just to the south of the Triangle Zone could be well positioned – quite literally – should another gold production company like Eldorado come knocking. Alexandria recently announced the commencement of their summer drilling program, which is specifically focused on defining and expanding the Companys near-surface gold resources where it has identified a stacked, high grade gold vein system. Earlier this year ALXDF released assay results showing high levels of gold and gold mineralization in the 2km area just to the south of the Triangle Zone.
Agnico Eagle Mines Ltd. (NYSE: AEM) is another gold production company that has been active in the investment in and acquisition of junior mining companies. The Toronto based company has invested in more than 20 junior mining companies since 2010, five of those investments being complete takeovers. It has been reported that prior to settling for the $590 million dollar agreement with Eldorado, Integra had offers from two other companies.
With substantial property in the Val d’Or region and high grade assay results from their winter drill program, it is not unreasonable to think that Alexandria Minerals may be a consideration by a larger production company. Steven deJong, CEO of Integra Gold believes that equity stakes held by gold production companies in the juniors will start to result in full-blown acquisitions, as was the case with his company. High quality, high grade, high margin projects in safe jurisdictions with a short timeline to production will continue to demand a premium” he said.