Nobody likes resource companies these days. Heck, nobody likes the markets at all.
But I think it's time for anybody with a sense of reality to once again consider looking at resource plays as a way to reap the incredible opportunities that this market has in store for risk-tolerant and patient investors.
Since last year, I am sure that all of your senses have gravitated towards the sentiment that the resource sector, especially the juniors of the Canadian exchanges, will not last another year. I am sure you have heard that many are stuck with projects that are too big for their companies to handle. I am sure you have seen corporations go belly up right under your nose. I have too. I speak with these companies each and every day.
But have you heard the other side of the story?
Traditional sources of financing have been near impossible for corporations. Remember the days when banks would force upon you every possible loan available? I do. That was last year. But things are different now. Banks have undergone a dramatic overhaul and are now terrified to even mention the word loan.
For most corporations, it doesn't matter how good your cash flow, revenue, forecasts, or your balance sheet might be. It doesn't matter if you have been in business for 50 years and have never missed a loan payment. Even the billions upon billions of government bailout funds and depressed central bank rates all across the world are not enough to get the credit flowing again. And you know what? It doesn't seem to be that big of a deal.
Not to the resource companies, anyway.
In the past few months, natural-resource players have raised well over $40 - $45 billion from outside the regular banking system. Most of the funds, from private investors and investment banks, have been accumulated through private placement bought deals and these astronomical financing figures are still pouring into both the smallest of the small caps and the largest of the large caps.
Need proof?
In February, Kinross raised $400 million (bought deal), then used $150 million to buy 20% of Harry Winston Diamond Corp. Cameco raised $460 million (bought deal) and BHP Billiton creatively raised $3.25 billion through corporate bonds. The list goes on. Even Gold Wheaton, a company trading at less than $0.26, has raised $200 million in the last few months.
Early February, practically every mining junior corporation I spoke with were worried about raising cash. Now many of them have held successful fundraisers over the last 60 days. In less time to follow a full season of your favourite sitcom, the one industry everyone shunned is now at the forefront of cash infusion from private lenders and big time investment players.
The money being poured into the resource sector is obviously coming from the successful and notably wealthy players of our markets. No doubt they see the natural resource sector as the goose that lays the golden eggs and as a force field to deflect the dangers against the battalion of the U.S Treasury's printing presses.
It's not only the big investment players coming out to swing their bats. Let's not forget the biggest player of them all: China.
Over the last few months, China has been buying up everything natural resource from Copper and Iron miners to Canadian Oil Sands.
According to a statement on their central government's Web site from Commerce Minister Chen Deming, China will send more commercial missions overseas to make purchases and investments this year. During a recent purchasing tour in February to Germany, Switzerland, Spain and the U.K., Chinese companies spent more than $13 billion. According to the 21st Century Business Herald, the US is the next stop as the Chinese ministry sends a business group on a buying trip to the U.S. later this month.
These investments may not all be in the form of resource-specific plays, but the underlying tones based on their recent actions suggests to me that resource is a big part of their focus.
The big players in the investment business have all come to play ball on the resource sector's home court. Do you want to be sitting in the nosebleeds when the game begins or do you want a spot in the starting line up?
Obama Talks G20 Aboard Air Force One
This week, US President Obama filmed aboard Air Force One between vital diplomatic engagements abroad, and discussed the breadth and depth of the global challenges we face. Recapping his trip, though, it is clear just how much opportunity lies in reshaping America's relationships around the world.
On everything from turning our economy around -- which shed hundreds of thousands more jobs last month -- to ending the threat of nuclear arms, "The only way forward is through shared and persistent efforts to combat fear and want wherever they exist."




Dollars raised
Date: 04.05.09 Posted by: Daniel Wilson
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replyI too have noticed the immense amount of money being raised in this market. I see so many news releases being issued everyday with headlines that say "abc gold and silver closes private placement"
If you have an attractive project in this market, you should still be able to get money. This will weed out any companies that don't cut it in my opinion
Re: Dollars raised
Date: 04.05.09 Posted by: Helli Kat
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$200 million for Gold Wheaton! They're trading at $0.22 right now! Same management as Silver Wheaton from what I could gather and they make their money off of gold streams with a base cost of $400 ounce. Looks very promising if gold can stay at these levels. My only concern would be for the long term of gold settles down
Re: Re: Dollars raised
Date: 04.05.09 Posted by: Bird Man
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Keep in mind that the juniors are still extremely risky. If you're going to make bets, make sure to do some serious DD. It's funny because if you call IR companies, you can hear the misery in their voices. I wonder if the corporations they work for know how miserable their IR people sound. Its a complete joke in my books. If I were CEO and my IR guy or gal was talking like it was the end of the world, I would fire them straight away.
Re: Re: Re: Dollars raised
Date: 04.05.09 Posted by: Jeffery Zack
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IR people are a complete joke. They don't know anything. Thats what CEO's and management do though. They'll hide behind those guys all day.
Taking a spot in the starting lineup
Date: 04.05.09 Posted by: Grill Man
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replyI have already been accumulating resource stocks over the last month. Commodities are my hedge against inflation and when the markets settle, these are the things that will soar. I just wish I had more money
China
Date: 04.06.09 Posted by: James Thompson
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replyTake a look at my last two blog posts - both with China buying oil properties. The last post, which I responded to here, is a potential buy from China themselves. Looking for more of these buyouts in the near future
Gold Wheaton
Date: 04.06.09 Posted by: Jason
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replyI've been buying this stock during the last two rounds of financing. Looking very promising and another user brought to my attention one of the insiders buying is none other than Francesco Aquilini
Re: Gold Wheaton
Date: 04.06.09 Posted by: Dewayne18
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He also bought some warrants... The warrants are looking attractive. It's a good way to get in on GLW without paying the full share price. Only 6 cents and they're good for 2 years.
Re: Re: Gold Wheaton
Date: 04.06.09 Posted by: Christopher Jackson
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What are the warrants for? How much? 6 cents per warrant at ?
Re: Re: Re: Gold Wheaton
Date: 04.06.09 Posted by: Dewayne18
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The warrant entitles you to buy a share at a set price for a certain period of time. For Gold Wheaton I think you can buy a share for 50 cents until November or December of 2011. Right now, the spread for GLW warrants is 5.5 to 6 cents. If your buying for the long term, it's a cheap way to get in without committing too much money. Your paying a bit of a premium right now, but at this time it's on the cheap side if you look at the trading history. I think the high is around 11 cents. The point is not to buy the shares, but to trade the warrants. Now if you thought the stock was in fact going way above 50 cents, then you might want to buy the warrants for the sake of buying shares at a cheaper price. Hope this helps.
Re: Re: Re: Re: Gold Wheaton
Date: 04.06.09 Posted by: Christopher Jackson
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Thanks for the heads up. I think the warrants may be a little expensive with only a 2 year expiry but at the same time, these guys were well over a buck last year and have a great management team. Not to mention its pretty obvious these guys have serious financial backing
Re: Re: Re: Re: Re: Gold Wheaton
Date: 04.09.09 Posted by: Jason
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Might be worth the look, 2 years isnt really that far off
Great blog
Date: 04.08.09 Posted by: Joe Stevenson
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replyI never really took notice of all the financing that has taken place in this depressed market until I read this post from the newsletter. The more I look, the more I see incredible amounts of dollars being raised in this market which helps me to believe that we may see more takeovers in the works in the near future