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.
- Add Newmont Mining to my watchlist
- Add Goldcorp to my watchlist
- Add Teck Resources to my watchlist
