While gold shares as a group experienced a particularly difficult year in 2011, many junior gold stocks were the hardest hit in the sector. The Market Vectors Junior Gold Miners ETF (GDXJ) – a basket of more than 80 precious metals exploration and development companies – tumbled 35.0% last year, almost twice as much as the Market Vectors Gold Miners ETF (GDX).
However, one item that has not been discussed in much detail is that certain junior gold shares significantly outperformed their peers in the latter part of the year. In light of this, Macquarie equity research analyst Michael Gray discussed this development in the firm’s outlook for 2012.
“In the latter part of 2011 the high-grade/high-margin deposits as a group significantly outperformed the group of companies with low-grade/large capex deposits,” Macquarie noted. ”We expect this trend to continue in 2012 with outperformance by the high-grade explorers.”
As for specific companies, Macquarie highlighted Extorre Gold Mines (XG.TSX), Mirasol Resources (MRZ.TSXV), and Midas Gold (MAX.TSX) as its “top names” as potential acquisition targets for larger-cap gold producers. ”Extorre’s Cerro Morro is a high grade, low-capex, near-permitted project in mining-friendly Santa Cruz, Argentina,” the firm wrote. “Mirasol has a new 100%-controlled silver discovery at its Virginia project in SantaCruz, which has significant resource potential. Midas’ 100%-owned Golden Meadows project is a 5.8moz gold system in Idaho that we believe has significant exploration upside.”
Macquarie also noted that it still views ATAC Resources (ATC.TSXV) and Strategic Metals (SMD.TSXV) “as potential takeover targets, but we have lowered them in our pecking order until new discoveries are made.”
With regard to its macro themes for the sector in 2012, the firm contended that “We believe the market will be in a ‘show me’ mindset for new and emerging discoveries. This means that early drill-hole plays will likely need to deliver strong results along with continuity in order to maintain market capitalization gains.” In addition, ”Escalating labour and construction material costs are expected to push up initial capital costs for many of the larger projects that our covered companies either plan to build or that may be acquisition targets.”
Aurizon Mines Advances Duvay Gold Project
- The current field operations at Duvay are centered around a mini-bulk sampling program and drilling
- The first two pit sample concentrates have been shipped to an independent laboratory for analysis by fire assay; processing of the third mini-bulk sample has commenced
- Results from the first 13 hole drill program included the intersection of 83.19 grams per tonne of gold over 1.0 meters.
