Third Party Research: Pinnacle Digest May 24, 2011 .. . .. ... .
Yukon Gold Rush
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Yukon Gold Rush
Bob Weir, CFA
Managing Director, Research Services
May 24, 2011
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Yukon Gold Rush May 23, 2011
The Klondike Gold Rush was the most famous gold rush in world history. It occurred
before the turn of the 20th century in and around Dawson City, Yukon, Canada.
It has been more than a hundred years since the Klondike Gold Rush (1898) made
Dawson City (at the time) the largest Canadian city west of Winnipeg.
Over 20 million ounces of gold was found through the process of placer mining in the
rivers and streams surrounding Dawson City in the Yukon's first gold rush. Thousands
of prospectors lost their lives in pursuit of the yellow metal. With gold touching new
all-time record highs in 2011 and investors slowly, but surely, giving in to its fiscal
insurance amidst phenomenal global uncertainty, it is only natural that the gold rush
be back on.
In the last couple years, some of the biggest finds in Yukon history have sparked a
claims rush greater than anything we have seen since the late 1800s.
PinnacleDigest believes that, by the time this gold rush is over, the debt crisis in the
United States, and much of the western world, will temporarily destabilize the world's
monetary system. This will lead to unpredictably high gold prices. We are confident the
Federal Reserve, as discussed at length in last week's newsletter, will do everything in
its power to delay the inevitable and thus allow the gold “mania” to build to a climax,
likely three years from now. How long the period of “monetary destabilization” will last
is anyone's guess, but we believe the Fed cannot extend the day of reckoning beyond
three years from today. There are too many factors beginning to come undone.
Key Point: To play this gold market right you have to think in terms of months, and
not weeks or days. Flippers will lose the majority of the time; or at best, lose out on
the majority of the massive profits to be had. You have to do the research, follow the
top management, position yourself and be patient. The gold market will take care of
itself in the months ahead and drive the shares of top miners through the roof. Will
you have the fortitude to sit through pullbacks in gold and silver to reap the rewards?
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The Area That Will Produce Massive Wins For Investors
Focusing back on the Yukon: We believe this region of the world will receive the lion's
share of investment dollars looking to capitalize on gold juniors over the coming
months and years. The first Yukon Gold Rush saw roughly 20 million ounces of gold
extracted. We believe much more than 20 million ounces will be mined from the Yukon
by the conclusion of this super cycle in precious metals.
This time around the stakes are higher.
To understand the current gold rush in the Yukon, one has to understand the basic
methods and history of placer mining. The Yukon Territory is the world's largest known
occurrence of placer gold. The art of placer gold mining is the oldest method of
recovering gold from alluvial deposits. It takes advantage of gold's high density, which
causes it to sink more rapidly from moving water than the lighter siliceous materials
with which it is found. Think of an old man panning for gold in a stream. This is one
form of placer mining. It can be done on a small individual scale or a very large scale.
Understand that placer gold always comes from a larger source of gold. The majority
of modern gold mined around the world is produced from lode, or “hard rock” deposits.
The source of placer gold is usually 10 times that of the amount of placer gold initially
discovered. So, finding the source can lead to billions in profits. This is what the Yukon
Gold Rush of today is really all about.
Following some world class drill-hole results in the past few years, the rush is on to
find the mother lode - A.K.A: the source of the 20 million ounces of placer gold in the
Yukon. Remember what was mined and found in the late 1800s was simply what came
to the surface and was easily mined by either individuals or archaic equipment. The
end game for today's prospectors is locating the source. Finding a piece of the mother
lode would lead to (and already has for a few companies) “superstardom” and extreme
ATAC Resources was a company that led the reawakening of the Yukon Gold Rush. It
began putting out news releases that it had made four new Carlin-Type gold
discoveries - comparing it to the famous Carlin Trend of Nevada. As staggering drill
results came out and the potential began to take shape, its share price went from
$1.80 to $7.53 in a handful of days as investors poured money into the stock from
around the world. To say its two-year chart, shown below, is impressive would be a
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The area that PinnacleDigest is focused on is the White Gold District where
UnderWorld Resources was recently bought out by Kinross Gold - one of the largest
mining companies in the world. UnderWorld put out a jaw dropping drill result of 3.39
g/t Au over 104 metres! After quickly completing a resource calculation of over 1.5
million ounces, Kinross had seen enough and bought them out for $139.2 million - gift
wrapping huge returns to early investors. UnderWorld's three-year chart is below and
although it does not have the meteoric rise that ATAC had, the market cap was
steadily climbing during this period through private placements and in the end, the
value created for shareholders was quite astonishing.
The flat line, late last year, is after Kinross bought them out. What is interesting is that
Kinross made its move relatively quickly. The buyout occurred before UnderWorld had
time to further advance its two key deposits and potentially, dramatically expand its
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The Man Leading The Rush in the Yukon
There was one man behind this discovery who has not gone unnoticed. His name is
Shawn Ryan. In fact, he originally identified and sold UnderWorld's lead project,
Golden Saddle, to them. Ryan is a man who used to scour the countryside for exotic
mushrooms in BC and the Yukon (for sale to gourmet restaurants around the world).
He was once so destitute, that at one point he had only $5 to his name.
Things have picked up for Mr. Ryan (to say the least) as he now controls over 12,000
of the 20,000 claim blocks in the immediate area known as the White Gold Property or
District (in the Yukon). This is the region where the UnderWorld deal happened. He
walked away with millions after the UnderWorld deal went down and was recently
chosen as Prospector of the Year by British Columbia's mineral exploration industry.
We will have more details on Mr. Ryan in an upcoming newsletter. We will explain his
methods and how he is leading the gold rush back into the Yukon – and how hundreds
of millions of dollars are following him there.
As the gold bull market begins to mature, our team expects to see buyouts in the
Yukon. This is what we are searching for. We have found tremendous profits with
several of our Featured Gold Companies, but we want the grand slam. We want to find
and introduce the next major buyout that investors will be talking about for years to
come. That is our mission and we have never worked so hard to try and find it.
The major miners in the gold market have been reporting record profits, quarter after
quarter after quarter. The combination of record production levels and record profits
create a buyer’s mentality out of necessity. Majors are now flushed with cash and
depleting gold reserves. They will continue to invest in what they know. The majors
have to replenish their gold reserves and the only way to accomplish this is by buying
smaller companies which have identified profitable deposits in well-known mining
One can argue that the Yukon is the most mining friendly region on earth. The license
plate shown below has a picture of a miner on it and the words “Klondike” for crying
out loud! This is an actual license plate from the Yukon. Over the next 3-6 quarters our
team knows we will see buyouts abound as majors put their billions of dollars to work
in securing gold projects. Now is the time to position oneself for the soon-to-come
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The Yukon Geological Survey has estimated that an unbelievable $330 million will be
spent on gold exploration in the Yukon this summer alone. That is a staggering sum.
Our research tells us that over 100 companies have joined this gold rush and will be up
there clamouring for results and “superstardom”.
For companies in the Yukon there will be no summer doldrums. This is not the sector
to “sell in May and go away” on. For the miners up there, it is the busiest time of the
year. For investors, the summer is the time to get positioned, because in late
summer/early fall, the rubber will hit the road for many of these companies; drill
results will be released. This is when the money is made from an investors' standpoint.
You can bet your last dollar we are close to making a move on one of them.
All the best with your investments,
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