Caspiche gold deposit makes Exeter a takeover target

The improbable feat of commercializing Latin America’s second largest undeveloped gold deposit has achieved a major milestone validation for its unlikely owner, a small Canadian explorer named Exeter Resource.

Last week, Vancouver-based Exeter (TSX: XRC) (NYSE: AMEX: XRA) completed an initial blueprint for a mine, known as a pre-feasibility study, that suggests a mine worth over $27 billion in future revenues is technically and economically viable.

Known as the Caspiche deposit, this monster deposit is located in northern Chile’s gold-rich Maricunga mineral belt, where over 100 million ounces of gold are already concentrated among a clutch of existing mines.

Now the region has gained some additional luster with the announcement that Caspiche boasts 19.3 million proven and probable ounces of gold. A further 4.6 billion pounds of copper and over 41 million ounces of silver also sweetens the overall value of the deposit. This makes it one of the world’s biggest gold discoveries in recent years and one of only a tiny handful of mega deposits not yet snapped-up by the world’s major mining companies.

David West, a precious metals analyst for the Vancouver-based investment bank, Salman Partners, says that this pivotal benchmark development significantly de-risks Caspiche and makes it a prospectively tantalizing takeover target for the world’s top gold producers.

“It certainly raises the company’s profile as a takeover candidate, which could be one of the usual suspects in terms of larger mining companies,” he says. “Or you might even see a Chinese company take a run at it.”

In spite of the prohibitive mine development costs involved – totalling $4.8 billion — a project of this magnitude is something that major mining companies can’t really afford to pass up on indefinitely, West adds. “Sooner or later, someone will buy-out this project.”

Caspiche’s appeal is underscored by the fact that fewer and fewer world-class gold deposits (at least five million ounces in size) are being found. The current success rate is about one per year, regardless of how many companies are hunting for them and the approximately US $4 billion per year that is being spent on this increasingly challenging quest.

In spite of bullion’s spot price having increased six-fold since its lows nearly a decade ago, the world’s deep-pocketed, big-league gold miners have found themselves scrambling to replenish dwindling inventories. So they’re aggressively targeting takeover candidates that own undeveloped multi-million ounce discoveries, rather than merely relying on organic growth.

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Posted by admin on Jan 26 2012. Filed under Gold mining. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry