Is Miranda the Next Piece of McEwen's Cortez Is Miranda the Next Piece of McEwen's Cortez Puzzle?
By David J. DesLauriers
30 Dec 2005 at 02:05 PM EST
TORONTO (ResourceInvestor.com) -- Speculators have driven Miranda shares [TSXv:MAD] up 50% in the last month or so, presumably on speculation that Rob McEwen, whom RI interviewed when this whole thing began, could enter the fray.
The Area
Some familiar with the area have pointed out that the purchase of an interest in White Knight [TSXv:WKR] and Nevada Pacific [TSXv:NPG] made sense for McEwen, CE of U.S. Gold [OTCBB:USGL], because both companies have properties surrounding, or in the immediate vicinity of Tonkin Springs. It is pointed out that the other junior, conspicuous on a claims map for the part of its land package that lies near Tonkin Springs, is Miranda Gold.
An Opportunity?
The other two Nevada companies in which Rob McEwen has purchased an interest of late are Coral Gold [TSXv:CGR], which has been around for a very long time, and Tone Resources [TSXv:TNS].
Tone Resources’ share price ran from 20 to 85 cents in the three weeks preceding the announcement of McEwen’s involvement. The news pushed shares to a high of 97 cents, and TNS now changes hands for 75 cents per share. Keep in mind that TNS’ market capitalization is only a fraction of Miranda’s.
The question is, has Miranda been driven purely by speculators now that McEwen’s plans are so well telegraphed, or is MAD as leaky a boat as TNS? For speculators, the second germane issue is, with Miranda already up 50%, if McEwen does act will there be more in it for the traders or will we witness a pullback (sell on news)? Also, with a couple of JVs, and a few million in the treasury, what price would McEwen have to pay to acquire the kind of interest that he’s looking for? For Coral (much smaller m/c as well), he paid a substantial premium.
Consolidation
McEwen’s stated desire is to consolidate the Cortez play, and one would presume that that means under one corporate banner - but is that possible? Management of Nevada Pacific, White Knight, et al. most likely have little desire to be consolidated, as they have been operating independently and successfully for years, are well known in Vancouver, and have the reputation to continue to operate on their own.
But even if NPG, WKR, CGR, TNS and USGL were merged to create one play for institutional and retail investors to participate in the exploration of the Cortez trend, how attractive would the resultant company be? The market capitalization of the merged company would be C$325 million, and if you throw Miranda into the mix, that number would be in excess of C$375 million. The combined entity would have a couple million ounces of shallow gold, most of which would be 43-101 compliant, and would probably raise a very large sum - maybe C$50 million, to adopt the Friedland model of drilling around the clock with multiple drills until something is found.
In such a prolific and underexplored region (at depth), that could work well, but it would certainly be a large capitalization to support if initial drilling were unsuccessful.
Conclusion
It’s unclear whether or not Miranda is in play, or whether the rise in share price will continue if a McEwen investment does come to pass, and at what price that purchase would be made.
It is also not certain how a consolidation would proceed from here. The answers to these questions will most likely be revealed in 2006, and this should be a very interesting area to watch, which will no doubt bring some excitement to the sector, and help reinvigorate interest in the junior area, among investors.