A Pair of Golden Eagles
By
Christopher Barker
June 30, 2008
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The golden eagle was nearly wiped out in the United Kingdom by the early 19th century, and it remains a protected species there. On the North American continent, the birds have fared better. This week, in fact, an unusual pair of golden eagles -- though not the flying kind -- was observed interacting in Ontario.
Canadian junior gold miner Gold Eagle Mines, which trades on the Toronto exchange, recently announced a major strategic investment in which intermediate-scale miner Agnico-Eagle Mines (NYSE: AEM) purchased more than 5.5 million shares of Gold Eagle at around $9 per unit, for a 7% stake in the company. In addition, the larger eagle received half as many warrants to purchase additional shares during the next 36 months at about $10 a stub.
Gold Eagle is an exploration-phase junior mining company that operates on what Agnico-Eagle clearly considers a promising gold-bearing property in the Red Lake region of Ontario. The region has yielded 20 million ounces of gold, and Goldcorp (NYSE: GG) operates two mines there. Gold Eagle's primary focus is the Bruce Channel Discovery, and the infusion of $50 million in capital from this private placement is slated to fund underground exploration at the site.
As I see this through my Foolish lens, the share purchase is somewhat like a progress report for Agnico-Eagle. As I pointed out last month, the company has been rightfully focused on organic growth, pursuing development of four wholly owned projects simultaneously. If the company can spare $50 million for this investment, above and beyond a $550 million capital-expenditure budget and a $65 million exploration budget for 2008, that's a sign that cash is flowing nicely from the two operating gold mines. The company's balance sheet sports zero long-term debt and $294 million in cash. Combine all of that good news with this latest move, and this Fool will remain a bird watcher.
Further Foolishness:
“The Death of the Euro!”…Greece may seem worlds away, but be warned. What happens there next could reshape global finance and rattle your portfolio. On Mar. 22, The Motley Fool’s Tim Hanson heads to Greece to get the story. Follow in real time and hear how best to profit from this historic development (Hanson returned from China in July with a stock that’s up 117%!). Enter email below.
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