Outside of trade rumors here’s what’s driving the US markets higher

November 25, 2019

Chris Temple kicks off today with a look at the markets which continue to mover higher. The reasons being given for this move deal with trade comments coming out of China. We think there is much more then just another comment that we have learned means little to nothing in the long run. Pay close attention to the comments given on the short VIX trade and the mentality of investors as we close in on the end of the year.

Click here to visit Chris’s site – The National Investor.

    Nov 25, 2019 25:52 AM

    So here’s a big acquisition going down in the Gold space…..


    (KL) Kirkland Lake Gold to Add New Cornerstone Asset Through Acquisition of (DGC) Detour Gold, Grows Free Cash Flow, Mineral Reserves and Production

    by @businesswire on 25 Nov 2019

      Nov 25, 2019 25:55 AM

      Many have been speculating about what KL was going to buy with their growing war chest, and Detour Gold it is.

      Personally, I still believe there is a good business case that can be made for why Kirkland Lake will be acquiring Bonterra (BTR) in the not-so-distant future.

        Nov 25, 2019 25:58 AM

        (KL) Kirkland Lake Gold to acquire (DGC) Detour Gold in stock deal worth $4.9 billion

        by @canadianpress on 25 Nov 2019

          Nov 25, 2019 25:04 AM

          I had graduated (KL) to a Senior Major Producer this year, and anyone that was doubting that should see now that Kirkland Lake is truly one of the big boys now and is still one of the few on the hunt to acquire smaller companies.

          This is good for the whole sector, and hopefully we’ll see more of this crank up from some of the larger mid-tiers, as most of the other Majors have already combined forces with others and are divesting assets (not buying new ones).

          The pipeline of acquisitions will be driven by the better run Mid-tiers on the hunt for accretive bolt-on growth, or the other transactions will be the combining of peers in a merger of equals to consolidate assets/management teams/cash reserves and roll them up into a larger company with more eyeballs on it (like what has been proposed for Anaconda and Maritime).

          Let the games begin!

            Nov 25, 2019 25:25 PM

            +1 Ex. Good thoughts. it would be great if we could get several companies fighting over the same acquisition target. That would really get things going!

            Nov 25, 2019 25:32 PM

            +1 It would be great if one of these times several acquirers were bidding for the same asset. That would really get things going!

            Nov 25, 2019 25:04 PM

            Wow. (BAR) (BALMF) Balmoral Resources up 20% on this news today since it’s Martiniere project is on the Detour Gold trend. I’ll take it!

            Nov 25, 2019 25:54 PM

            Charles – Agreed. Let’s get some bidding war action going on some of these acquisitions. There aren’t that many quality assets up for grabs, so it would be nice to see higher valuations on some of these transactions, as that will light a brushfire in the sector as investors scramble to figure out “Who is next on the menu?”

          Nov 25, 2019 25:42 PM

          Ex – 100% agree, and a core portfolio holding. Not a fan of a couple gaps on the chart and the impact it had on the GDX today but great to finally see some M&A at this level.

            Nov 26, 2019 26:33 AM

            Hi Rubber – Yes bring on the M&A party!

    Nov 25, 2019 25:59 AM

    Excelsior what do you think about Victoria Gold?
    Been slowly accumulating this one!

      Nov 25, 2019 25:14 AM

      It is a solid well run company, and new producer. VIT has sold off by 1/3 since the peak this summer, which is unusual considering they were in their “Golden Runway” into production (where 90% of the time a 90% growth in share price is achieved).

      Granted they did have a very solid run into the summer on Gold’s appreciation, but most would have expected that regardless of where they were in the mining lifecycle.

      My experience with new producers is they usually have a few kinks to work out in the first 2 quarters of new production (look at what happened this year with Northern Vertex, Monarch/Monarques, Harte Gold, Silver Bear, Heron resources, etc… when they went into production).

      There is typically a transition in what type of investors are in the stock, where they lose the drill junkie investors that liked the exploration/development narrative, and pick up new investors interested in the production narrative.

      Victoria’s action has been odd in that it has pulled down here in tax loss selling season as it goes into production, but may actually get a nice pop during the season strength at the beginning of the year in the 2020 “Q1Run”.

      I like it but don’t own it, but have considered picking it up in December if there is any more weakness.

    Nov 25, 2019 25:17 AM

    Thanks Excelsior!!

      Nov 25, 2019 25:22 AM

      Good luck to you in your investing through year end and into 2020.

      Ever upward!

        Nov 25, 2019 25:29 AM

        Kirkland Lake says:
        Kirkland Lake Gold Ltd. and Detour Gold Corp. have entered into a definitive agreement whereby Kirkland Lake Gold will acquire all of the issued and outstanding securities of Detour Gold pursuant to a plan of arrangement.

        Under the terms of the transaction, all of the issued and outstanding common shares of Detour Gold will be exchanged at a ratio of 0.4343 of a Kirkland Lake Gold common share for each Detour Gold common share. Upon completion of the transaction, existing Kirkland Lake Gold and Detour Gold shareholders will own approximately 73 per cent and 27 per cent of the pro forma company, respectively.

        The exchange ratio implies consideration of $27.50 per Detour Gold common share based on the closing price of the Kirkland Lake Gold common shares on the Toronto Stock Exchange on Nov. 22, 2019, representing a 24-per-cent premium to the closing price of the Detour Gold shares on the TSX on Nov. 22, 2019. Based on the 20-day volume-weighted average price of the Kirkland Lake Gold shares and the Detour Gold shares on the TSX for the period ending Nov. 22, 2019, the exchange ratio implies a premium of 29 per cent to Detour Gold shareholders. The implied equity value of the transaction is equal to approximately $4.9-billion.

        Transaction highlights

        Adds a long-life, high-quality asset in a low-risk jurisdiction: Detour Lake is a uniquely large-scale, long-life Canadian mine, with current production of about 600,000 ounces per year and substantial growth potential.
        Solidifies Kirkland Lake Gold’s position as a senior gold producer with industry-leading free cash flow: Enhanced scale with pro forma 2019 production targeted at plus 1.5 million ounces and analyst consensus 2019 free cash flow of almost $700-million (U.S.).
        Bolsters financial strength and capital markets profile: Combined net cash balance of $630-million (U.S.) (as at Sept. 30, 2019), with increased public float, liquidity and access to capital, provides greater capacity to pursue further growth and return capital to shareholders.
        Increases Kirkland Lake Gold’s mineral reserve base and complements existing operating profile: Transaction adds 15.41 million ounces to Kirkland Lake Gold’s mineral reserve base and extends reserve life index by eight years.
        Enables value creation through continued optimization and potential expansion of Detour Lake: Financial strength and technical expertise of the combined company are expected to support the continued optimization and potential expansion of Detour Lake; opportunities exist to significantly increase production at improved unit costs and to expand current mineral reserves and mineral resources.
        Provides attractive exploration upside: Detour Gold’s land position covers 1,040 square kilometres along northernmost sections of the prolific Abitibi greenstone belt (including 646 square kilometres on existing Detour Lake property); combination of free cash flow generating operations, significant in-mine growth potential and considerable regional exploration upside is a common feature among Detour Lake and Macassa in Canada and Fosterville in Australia.
        Potential to deliver synergies: Expected pretax synergies of approximately $75-million (U.S.) to $100-million (U.S.) per year.
        Tony Makuch, president and chief executive officer of Kirkland Lake Gold, commented: “The acquisition of Detour Gold is an excellent fit for Kirkland Lake Gold. We have already taken two mining operations, Macassa and Fosterville, and transformed them into high-quality assets that generate industry-leading earnings and free cash flow. The addition of Detour Lake provides an opportunity to add a third cornerstone asset that is located in our backyard in Northern Ontario. Detour Lake will provide the pro forma company with a 20-plus-year mine life, which provides unparalleled optionality and excellent growth potential for the benefit of all shareholders. The management team at Detour Gold has done an exceptional job in making improvements and building momentum at the mine. Once the transaction is completed, we will continue efforts to optimize current operations and commence engineering work to evaluate expansion opportunities at Detour Lake, which we anticipate could lead to significant production growth, improved unit costs and higher levels of mineral reserves and mineral resources.

    Nov 25, 2019 25:24 AM

    Investment funds are borrowing money cheaply and diverting money from bonds into shares with anticipated return coming from capital gains. Therein also lies the danger, and it is a real DANGER.
    Once the stock market starts to drop, and for different managers the amount of drop will vary, but IN ORDER TO PRESERVE GAINS, the RATE OF EXITING, once it starts in earnest, will be VERY HIGH.
    I suspect we will see the rest of the world markets dropping first. (This will help as money is moved into the U.S. Market.) However, once that flow (which also aids the dollar) starts to end the U.S. stock market topping combined with dollar topping should signal that we are getting close to the end of the bull in stocks, foreshadowing a very, very sharp drop.
    Will the VIX spike up first? Probably.
    At what level of the VIX should one exit ? That is the REAL question. I wish I had the answer.

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