Gold Investing News

By Dave Brown - Exclusive to Gold Investing News

On Friday, the U.S. Labor Department released figures indicating that payroll records fell by 159,000 in September, the biggest decline in five years.

The unemployment rate remained constant at 6.1 per cent, which had already appreciated from April’s levels of 5 per cent.  As if they do not already have enough concerns as a result of the tightening in credit markets, the escalating job losses have put increased pressure on policy makers to do more to support the economy.

U.S. Federal Reserve Chairman Ben Bernanke is scheduled to speak to economists in Washington on October 7, and some central bank observers believe he might use this opportunity to signal that a decline in interest rates will be in the near term future.  In the context of the economic concerns, the spot price of gold finished the week at USD $836.60 per troy ounce.

Company news

Gold Wheaton Gold Corp. (TSXV: GLW) announced the appointment of Nolan Watson, former Chief Financial Officer of Silver Wheaton Corp. (TSX: SLW), to its Board of Directors on Tuesday.  David Cohen, Chairman and CEO of Gold Wheaton, confirmed the positive vote from shareholders, “Nolan will significantly enhance and strengthen the Gold Wheaton Board as we continue to grow the company. His extensive experience in the successful development of Silver Wheaton will be of immense value to the Company.”

On Friday, Adam Schatzker of the RBC Capital Markets equity research team initiated a “sector perform” rating on Gold Wheaton with a 12-month price target of CA$0.85 per share.  Schatzker believes that the acquisition of 50 per cent contained precious metals production from FNX Mining (TSX: FNX) and agreement to acquire Redcorp’s Tulsequah Chief mine’s future gold production, offers investors exposure to a high quality stream of current precious metals production.  A question remains as to current relative valuation levels, and the analyst further cautioned that Gold Wheaton may have higher initial exposure to platinum compared with gold, therefore, the relative price difference, not just the absolute price, between platinum and gold will directly affect Gold Wheaton’s profitability.  An estimated 67 per cent of revenue from FNX Mining will be from platinum production.

Investors may be interested in 3 potential catalysts for Gold Wheaton share price volatility to acquire positions or add to their holdings in the company over the next year.  On November 9, 520 million shares will come off hold, although some of this may have already been transacted in the grey market.  FNX Mining could sell some or all of its Gold Wheaton shares, which is equivalent to approximately 38 per cent of the company. Gold Wheaton may also be looking to grow through acquisitions as the recent financial crisis will provide opportunities and tight credit markets are creating huge challenges for juniors and developers to raise capital.

Gold Wheaton is a Vancouver-based company with a market capitalization of CA$813.8 M, engaged in the acquisition of gold and precious metal production streams from mining development and production companies current or future, with a focus on companies that have gold and precious metals as by-products of their base metal production.  The company finished the week at CA$0.74 per share which represents a 150 per cent discount to the company’s 52-week high.

Silver Wheaton also featured prominently in weekly news flow, as the company announced that it has agreed to purchase 25 per cent of the life of mine silver produced by Alexco Resource Corp. (TSX: AXR, AMEX: AXU) at its Keno Hill project for the lesser of US$3.90 per ounce or the prevailing market price per ounce of silver delivered.  The Keno Hill project is located in the Yukon, and consists of over 30 historic mines, which date from 1913 to 1989.  The district has produced more than 217 million ounces of silver and in July 2008, had a preliminary economic assessment (”PEA”) on the Bellekeno underground deposit.  The acquisition cost of US$50 million in addition to the purchase cost for the silver, would seem to imply a premium to current silver price levels.  The transaction does not represent a large acquisition for Silver Wheaton and the company is able to leverage off its balance sheet  to create new revenue streams derived from capital starved junior development companies.