RI gold discovery bolsters stocks
RI gold discovery bolsters stocks
CALGARY, Alberta (Reuter): Gold fever has swept stock markets in Canada as analysts grow increasingly confident that a discovery by Bre-X Minerals Ltd. in Indonesia might turn out to one of the world's biggest mines.
Market euphoria has sent Bre-X, an Alberta Stock Exchange- listed junior exploration company, up 46-fold in less than a year. It has also pushed up several other stocks with exposure to potential gold strikes in Indonesia.
Calgary-based Bre-X has said its Busang property in East Kalimantan, Indonesia, could harbor a minimum of 30 million ounces of gold, putting it among the top four in the world.
The world's largest discovery is Freeport McMoran Copper and Gold Inc.'s Grasberg discovery in Indonesia, which has 80 million ounces.
"In all honesty, I was pretty skeptical at the beginning because these guys were throwing out numbers that were world- class right out of the gate," said Dave Thomas, an analyst with Goepel Shields & Partners in Vancouver.
"But with what I'm seeing now, it really is the real McCoy."
Bre-X vice-president Steve McAnulty said several gold analysts have recently shed their skepticism over Bre-X's Busang mine, which the company began exploring in August 1993.
Bre-X, which is set to list its shares on the Toronto Stock Exchange and Nasdaq in March, has seen its stock rise to the current C$93.88 (US$68.59) from about C$2.00 ($1.46) last year.
Its ascent has triggered excitement over several junior mining firms with mines in Indonesia.
"Anytime that there is a success of this magnitude, an area play is sure to follow and it's no different in this scenario," said McAnulty.
Thomas said other stocks seeing rapid price jumps thanks to Indonesia gold fever include Yamana Resources Inc., South Pacific Resources Corp., Pacific Amber Resources Ltd. and International Skyline Gold Corp.
Yamana and International Skyline are listed in Toronto, South Pacific in Alberta and Pacific Amber in Vancouver.
Yamana, which is exploring near Bre-X's Busang property, last week announced a $14.7-million financing deal with giant Barrick Gold Corp.
South Pacific was probably the second explorer behind Bre-X to strike a deal for properties and begin exploring, Thomas said.
"They're familiar with how to do business in Indonesia, which is a very important thing, and they've also got some connections within the Indonesian bureaucracy."
South Pacific president Robert Chase said his firm's shares, which have risen to C$6.50 ($4.75) on Monday from C$4 ($2.92) on Jan. 10, were aided by the release of positive assay results last week of sampling at its Masupa Ria property, about 75 miles (120 km) from Busang.
Masupa Ria, one of three properties the company is exploring in Indonesia, is on the same mineral trend zone as Bre-X's, Chase said, adding that South Pacific is slated to begin drilling this spring.
Thomas said many firms have yet to prove their value through solid exploration results. It can also take several years to forge business contacts in the country, while its jungles and high elevations can be daunting for exploration.
"The fact of the matter is, a lot of these properties are pretty grassroots in nature, so investors are going to have to be patient in waiting for exploration results to become available," he said.
Bre-X's stellar share price rise is expected to continue as more drilling results are released, analysts say.
The company could also be courted as a takeover target by worldwide gold giants such as RTZ Corp Plc., said Eagle & Partners analyst John Hainey.
Other potential suitors cited by industry experts include Australia's Broken Hill Holdings and Canada's Placer Dome Inc.