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Checking In on the Juniors

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Gold is looking like it's back in rally mode, so it's a good time to check in on some promising junior gold and precious metals miners we've explored in the past.

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In October 2011, gold was coming off of its all-time high of roughly $1,900 per ounce just a month earlier. An ostensibly recovering US economy and continued worry over the debt crisis in Europe meant gold prices were bound to remain at high levels.

It was in this context that we recommended three junior gold miners that stood to greatly benefit from a projected gold run.

Juniors are small-cap miners, usually at the beginning stages of their production. As such, they offer greater potential for growth. Historically, they can produce outsized gains if they successfully execute their development plans.

Be forewarned: Junior miners are highly volatile stocks and their price fluctuations sometimes don't parallel how they actually manage their mining projects. The miners highlighted already enjoyed existing production and ample funds for future projects. However, these juniors were also viable acquisition targets by larger miners seeking to expand output.

Joining the Seniors

Minefinders, which owned the Delores mine in northern Mexico, exceeded its 2011 output estimate of 65,000 to 70,000 ounces of gold by producing 74,000 ounces of the yellow metal.

The miner racked up a stellar 2011, as revenue grew 160% to $241 million and earnings in-creased almost 15-fold, to $96.6 million. The company's balance sheet was also healthy, with $240 million in cash and equivalents on hand and only $30 million in debt.

However, the strength of this company and its productive mine made it an attractive acquisition target. Pan American Silver Corp. (NASDAQ:PAAS) bought the company this year in a deal worth $1.2 billion. The deal created a combined company valued at $4 billion, and doubled Pan American's silver production to 50 million ounces by 2015, with eight mines across Latin America.

Minefinders' shareholders received options in cash and shares of Pan American amounting to $13.90 per share-roughly equal to the value of the company in January when the deal was announced. Tender your shares of Minefinders.

Senior gold miner Eldorado Gold (NYSE:EGO) acquired European Goldfields for $2.4 billion in shares. Under the deal, European Goldfields' shareholders received 0.85 of a share of Eldorado common stock. The acquisition was completed in February 2012. Tender your shares of European Goldfields.
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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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