Categories: Base Metals / Precious Metals
Topics: General Base Metals / General Precious Metals

Yukon Fever: Today’s Hottest Area Play

Nov. 18, 2010

Building on the spectacular early takeover of Underworld Resources by gold major Kinross this June, recent discoveries in the Yukon Territory have made this large region of frozen tundra the hottest area play in the junior resource sector today.

Economy

The Yukon is Canada’s smallest sub-economy, with a GDP of only C$1.4 billion. It may be small, but mining is a traditional and essential part of the Yukon economy, and it’s also its fastest-growing segment: from 2003 to 2008, the mining industry expanded at a 10.5% average annual rate, far exceeding the 3.1% growth of all industries.

A lot of this growth came in 2008 (latest available data), after the successful launch of Capstone Mining’s Minto copper mine, and new discoveries in the area started attracting a lot of investment money to this underexplored but highly prospective region. Mining grew by a whopping 56.3% in that year.

Minerals

The Yukon is well endowed with a number of mineral resources, including lead, zinc, silver, gold, tungsten, and copper. As of 2009, it had 84 mineral deposits with established reserves and resources, and 2,700 known mineral occurrences.

Much of this natural wealth, however, is spread across areas with little exploration history. Aware of mining’s economic importance, the Yukon government is offering various financial incentives to continue drawing investment capital and exploration effort to the region. These incentives, combined with a stable business climate, were quite successful in making the Yukon one of the world’s best places to explore.

A survey of metal mining and exploration companies operating around the world, conducted annually by the Fraser Institute, places the Yukon 4th among 51 jurisdictions on its Policy Potential Index (PPI). We have used this mining survey extensively when reviewing other jurisdictions. The chart below shows how the Yukon compares to the rest of Canada:

We wouldn’t have ranked Newfoundland and Labrador above Ontario, but nevertheless, this ranking paints a very positive picture: mining companies can take advantage of the territory’s rich mineral potential with relatively little risk. Some 70 mining companies, as of June 2010, already are.

Since 2005, exploration activities in the Yukon were on a steady uptrend, following the lead of such major mining jurisdictions as Ontario and Quebec, as shown in the next chart. (Exploration seems to be dropping back in BC, but that’s a tale for another day.)

But can we really say that another exploration boom is underway in the Yukon? Yes. Historical data shows that the amount of exploration there has been extremely high in recent years, dwarfing even the pre-Bre-X boom of the mid-1990s, as you can see in the next chart.

Exploration expenditures, the key to unlocking the Yukon’s hidden treasures, slowed to C$90 million in 2009 from C$110 million in 2008 following that year’s infamous market collapse, but 2010 looks to be a turnaround year. Exploration spending is forecast to match the 2007 record of C$140 million.

There are many players in this field, with ATAC Resources (V.ATC) and Kaminak Resources (V.KAM) being among the most notable. The stock charts of both of these companies went nearly vertical last summer. It’s interesting to note that most of current gold production in the Yukon comes from placer mining. In 2009, the ten operating Yukon placer mines produced 54,478 ounces of gold, up 3.4% from 52,709 ounces in 2008. The value of this production was US$42.4 million. The next largest source is Minto, which produced 29,000 ounces of gold in 2009.

So what?

Yukon is not just a “good” or “favorable” jurisdiction – it is one of the world’s best. It has a very stable political climate, with a demonstrably pro-mining government. Other variables, like good roads and energy infrastructure, add to its positive attributes. And the place has a lot of room for exploration. The prospects are wide open.

----
The big question is: who will have the next big gold discovery? There are many candidates, including two companies in our Casey’s International Speculator portfolio that are poised to gain big. Discover the editors’ secret of separating the wheat from the chaff, in our FREE report “The 8 Ps of Resource Stock Evaluation.” Click here to read it now.

The Casey Research web site, Casey's Investment Alert, Casey's International Speculator, BIG GOLD, Casey's Energy Confidential, Casey's Energy Report, Casey's Energy Opportunities, The Casey Report, Casey's Extraordinary Technology, Conversations With Casey, Casey's Daily Dispatch and Ed Steer's Gold & Silver Daily are published by Casey Research, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information.

Doug Casey, Casey Research, LLC, Casey Early Opportunity Resource Fund, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.

Any Casey publication or web site and its content and images, as well as all copyright, trademark and other rights therein, are owned by Casey Research, LLC. No portion of any Casey publication or web site may be extracted or reproduced without permission of Casey Research, LLC. Nothing contained herein shall be construed as conferring any license or right under any copyright, trademark or other right of Casey Research, LLC. Unauthorized use, reproduction or rebroadcast of any content of any Casey publication or web site, including communicating investment recommendations in such publication or web site to non-subscribers in any manner, is prohibited and shall be considered an infringement and/or misappropriation of the proprietary rights of Casey Research, LLC.

Casey Research, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Casey publication or website, any infringement or misappropriation of Casey Research, LLC's proprietary rights, or any other reason determined in the sole discretion of Casey Research, LLC.

Affiliate Notice: Casey Research has affiliate agreements in place that may include fee sharing. If you have a website or newsletter and would like to be considered for inclusion in the Casey Research affiliate program, please email us at http://www.caseyresearch.com/affiliate/. Likewise, from time to time Casey Research may engage in affiliate programs offered by other companies, though corporate policy firmly dictates that such agreements will have no influence on any product or service recommendations, nor alter the pricing that would otherwise be available in absence of such an agreement. As always, it is important that you do your own due diligence before transacting any business with any firm, for any product or service.
© 1998-2010 by Casey Research, LLC.

Categories: Base Metals / Precious Metals Topics: General Base Metals / General Precious Metals

Yukon Fever: Today’s Hottest Area Play

Categories: Base Metals / Precious Metals
Topics: General Base Metals / General Precious Metals