EGO (ELD) and BGO comments
<If the tastes of investors in Canadian gold shares are anything to go by, small is beautiful.
With less than inspiring profits from Canada's big gold producers over the past two weeks, small- and medium-sized gold miners have taken center stage on the Toronto Stock Exchange and show no signs of giving it up.
Take Eldorado Gold Corp. (CA:ELD) . A small Vancouver-based company with expected production of a modest 95,000 ounces of gold this year and next from just one mine, it is hardly on the radar screens of big brokerage analysts.
But the stock has jumped 11-fold since the beginning of last year, surging from just 27 Canadian cents to a new high this week of C$3.24. And it is showing no signs of slowing its stellar run, making it hard to ignore.
Stock of Bema Gold Corp. (CA:BGO) , with expected production this year of 270,000 ounces -- which is lightweight compared with the 1 million ounces a year output of senior producers -- has nearly doubled in price since June and hit a new high on Friday.
Why do investors appear so keen to pour money into these lesser-known and certainly riskier gold companies? Market analysts say the answer is simple and two-fold: the rising gold bullion price and falling gold production worldwide.
Since the bullion price stirred from lows in February 2001, there has been a growing belief that gold has entered a long-awaited bull market.
At the same time, the future production profiles of the big producers are falling as new minable gold deposits have become increasingly scarce. This is partly because of cuts to exploration budgets during the dark days of a 20-year gold bear market during the 1980s and 1990s.
"Investors are looking at the gold price and saying 'who is going to benefit?' The reality is that there are very few major gold deposits. The last major one was Bre-X and that was a fraud," John Ing of Maison Placements Canada said.
Several of the smaller, more exploration-focused players such as Eldorado, are sitting on large gold deposits discovered several years ago and stored away for a time when higher bullion prices would make their development viable.
"Kisladag is one of the few projects around the world currently being developed into a mine," Earl Price, Eldorado's chief financial officer said, speaking of the company's project in Turkey.
If all goes according to plan, Kisladag, with gold reserves of 4.5 million ounces, should start producing in late 2004.
Vancouver-based Bema Gold's Kupol project has lit a fire under this stock. Although only at the drilling stage, the market is expecting big things from the project located in remote far eastern Russia. On Friday, the stock soared 13 percent ahead of more drill results expected out this week.
By contrast, quarterly results from Canada's biggest gold producers -- Barrick Gold Corp. (CA:ABX) , Placer Dome Inc. (CA:PDG) and Kinross Gold Corp. (CA:K) -- have not excited the market and show a worrying trend of higher costs.
"Even with the gold price at $350 an ounce, they are hard pressed to make money," Ing said.
The juniors certainly look more exciting -- but only if one has a strong stomach.>
www2.marketwatch.com;
I have held off on BGO because of Russian Mafia concerns but will keep an eye on it
You can't have everything |
