By Dave Brown – Exclusive to Gold Investing News
The latest victim of the credit crunch was Washington Mutual Inc., a large Seattle based consumer and small business banking company that was established in 1889, as the Federal Deposit Insurance Corp. seized its assets on Thursday, selling some of it to JPMorgan Chase & Co.
The next banking failure may be Wachovia Corp, as Citigroup Inc., Wells Fargo & Co. and Banco Santander have all been negotiating with the company. The diversified bank possesses a larger market capitalization and stronger credit rating. but will have suffered significant losses in the wake of the collapse of the Washington Mutual Inc.
U.S. lawmakers’ failure to reach an agreement on the bank bailout bill, has been the story of the last week, pushing down the U.S. dollar and sending gold prices higher. Without an agreement in Congress, the markets are pricing in a considerable level of systemic risk and gold has historically possessed the moniker of the ultimate asset to hold in a ‘flight-to-quality’ scenario. Joel Crane, Metals Strategist at Deutsche Bank, said, “Whatever happens in Washington is going to affect the gold market, if there’s a deal struck that the market likes, that’s bad for gold. If there’s nothing done by the time the market opens on Monday, you’ll see another big run on gold.” The spot price of gold strengthened for a second straight week, ending Friday’s trading session at US$878.70 per troy ounce.
Company news
On Friday, Victoria Gold Corp. (TSXV: VIT) received a “speculative buy” recommendation from the mining & minerals team at Wellington West Capital Markets. In August, Victoria had agreed to terms to acquire Gateway Gold Corp. The Wellington West team has stressed their confidence that the transaction will provide Victoria with an enhancement in human capital, and mining projects in a politically stable and mining friendly jurisdiction. Research analyst, Paolo Lostritto believes recent market pessimism, and drilling challenges impeding the company’s share price presents a buying opportunity, underscoring a long-term positive view on gold prices and the accretive acquisition of Gateway. The 12-month price target for Victoria Gold is CA$1.40 per share which implies a 324 per cent premium to the current valuation levels.
Victoria Gold Corp. is a Toronto based mining and exploration company, with a market capitalization of CA$267 ml and possessing interests in 8 gold projects located in North Central Nevada. The share price for the company was down 5.8 per cent on Friday from the previous day’s close to finish at CA$0.33 per unit.
Analysts on the Macquarie’s commodity research team updated metal price forecasts this week and the equities research team has come out with a bullish research commentary on the North American gold mining industry. Goldcorp Inc. (TSX: G, NYSE: GG) was given an “outperform” rating, anticipating the Peñasquito mill startup in the early second quarter of next year with the second line starting in 2010. An increase in reserves, stresses the prospects of adding 5-8m oz thru conversion of telluride ores.
With disappointing second quarter results and weak production growth, the company has restructured some of its Canadian operations to remediate some unloading of previously stacked ore that will divert capacity from mining. Goldcorp Inc. has also has shifted its approach from a “mega pit” concept to a series of smaller open pits plus an underground component which should ease permitting challenges, that posed a significant threat to development. Macquarie’s 12-month price target for Goldcorp Inc. shares was CA$53.30, implying a 55 per cent premium to the current price of CA$34.45.
With its headquarters based in Vancouver, Goldcorp Inc. currently has a market capitalization of CA$25.8 bl. Goldcorp Inc. is one of the world’s largest gold mining companies, with operations in the United States, Canada, Mexico, Brazil, Argentina, Australia, Guatemala, and the Dominican Republic.
