Barrick announced record quarterly earnings of 1.2 billion dollars. Goldcorp’s released their earnings for the quarter and announced that they doubled from last year to 420 million dollars. Anglo American reported today that net profit in the first half nearly doubled from last year to $4 billion.
Barrick mines approximately 8 million ounces a year and therefore must replace 8 million ounces in reserves. The problem is that most large gold deposits have been found. Junior miners account for most of the gold discoveries worldwide and they're just not finding the 10 million ounce plus deposits anymore. The Seniors must now look to companies with deposits in the sub 10 million ounce range.
The Seniors, whom are now cashed up more than ever due to record gold prices resulting in record earnings, are seeking to make investments in the most promising junior mining companies. Agnico-Eagle just announced a $70,000,000 investment in Rubicon Minerals, representing 9.2% of Rubicon Minerals. Rubicon has a massive land position in the Red Lake mining camp in Ontario, home of Goldcorp's famous Red Lake mine. The Red Lake mine is the highest grade mine in the world with the lowest cash costs.
During the bubble phase in the 1970s, we saw seniors buying out the juniors and the stock prices skyrocketing on the news. We fully expect that before this cycle is over, history will repeat as the Seniors take their large cash holdings and take out the best juniors.
The junior market is a crap shoot, that's why it's best to leave it to the professionals and even then, realize that its still a gamble. That's also why it makes sense to have a basket of juniors so that if a few of them turn out to be duds, the gains you make on the others will more than make up for those losses.