Requiem for Gold's Final Fronteer

Upon glimpsing Fronteer Gold's (AMEX: FRG  ) 40% surge Thursday -- in response to a $2.3 billion all-cash takeover by Newmont Mining (NYSE: NEM  ) -- I pondered a celebratory fist-pump for a split second.

And then, like Facebook's founding CFO (as depicted in The Social Network), I felt a sharp pang of disappointment over the impending growth that I had suddenly been excluded from enjoying.

I've owned shares in Fronteer Gold since 2006, and I've retained the pick in my Motley Fool CAPS portfolio since 2007. As with all of my core gold and silver positions, I even held through that gut-wrenching collapse in 2008 that saw Fronteer's shares bottom out beneath $1.50. I spoke with Fronteer CEO Mark O'Dea in the midst of that maelstrom, and he correctly predicted that the industry would undergo a powerful consolidation phase as gold arose from that sharp correction. According to Bloomberg, Newmont's purchase marks the 321st deal in the gold industry over the last year alone. I had a vision for where these shares might eventually trade, and I can tell you that Newmont's cash offer -- which amounts to about $14.15 in U.S. dollars -- lies south of that mark by a considerable margin.

When I select my fleet of vehicles to ride this gold bull market toward my long-term target of $2,000 per ounce, I target the companies that I deem capable of delivering outstanding growth in shareholder value, in lockstep with that rising gold price. By methodically developing its cornerstone Long Canyon project into America's next top gold mine, and given the exhibited potential to multiply the scale of that deposit through additional exploration, Fronteer was building value at a considerable pace. Newmont now expects Long Canyon's total resource to triple or quadruple through further exploration work. Unfortunately, this Fool will no longer be along for the ride.

Likewise, I have been effectively shunned from participation in the exciting exploration potential of Fronteer's Northumberland and Sandman properties. Because Newmont is such a towering behemoth, it's not feasible for a Fool to follow these assets in a targeted way via Newmont's stock. Besides, I've already selected Goldcorp (NYSE: GG  ) as my major miner of choice.

Under the terms of the transaction, however, the remainder of Fronteer's properties will be repackaged within a spinoff called Pilot Gold. As I reported recently, Fronteer's 40%-owned Haligaga property in Turkey -- a joint venture with Teck Resources (NYSE: TCK  ) -- has returned very compelling drilling assays that are mindful of discoveries like Ivanhoe Mines' (NYSE: IVN  ) world-class Oyu Tolgoi property in Mongolia. I intend to hang on to those Pilot shares to see where Fronteer's proven team may take that asset portfolio, but that may prove a small consolation prize for the opportunity missed in Fronteer's three prime Nevada properties.

So rest in peace, Fronteer Gold. To Fools who may join me in mourning the loss of a potential multibagger, I hasten to point out the sheer number of similar opportunities that dwell in this precious patch. I have alluded to the Global X Gold Explorers ETF (NYSE: GLDX  ) as one easy way to play, and provided a list of my top 10 gold and silver picks for 2011. Select well, and I suspect you won't miss Fronteer Gold for long.

Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Fronteer Gold and Goldcorp. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 07, 2011, at 11:57 AM, Jbay76 wrote:

    Chris,

    I too plan on holding on to the spin-of Pilot Gold ad think they will do OK, assuming political stability in Turkey amidst all that's happening there. I'm planning on using the capital from this merger to double down on RBY and AXU and possibly get into copper fox or GRS..........we'll see. The transaction does not get finalized until April 11th, so anything can happen, as unlikely as some possibilities may be......

    On the bright side, there are worse reasons to mourn

  • Report this Comment On February 07, 2011, at 1:51 PM, EllenBrandtPhD wrote:

    If you're not afraid of a little geopolitical risk, look at my favorite baby Banro.

    Good time to buy right now, too, because private placement means Short side games for a day or two. But note that the Biggies snatching up the private placement - way above their last financing, so super Bullish - may include NEM, which recently bought 30 percent of a Banro-affiliated entity.

    Others who may be buzzing around are Freeport, Gold Fields, African Barrick, the Chinese, the Kazakhs, and the Israelis!

    Banro was also George Soros's favorite African play before the Great Crash, so he may choose to come back in again, too.

  • Report this Comment On February 10, 2011, at 10:17 AM, nyousef wrote:

    Chris,

    I have been holding this stock since 2006, and i was pretty sure that i will be selling my holding at $22 per share... it seems to me that Management wanted to get a quick profit. very disappointing...

  • Report this Comment On February 11, 2011, at 1:24 AM, jayw999 wrote:

    Have only had my shares since 2007, but yes count me in the FRG mourners...

    --Jay

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