The great gold stock Bull Market of the 1970's was driven by an unprecedented advance in the gold price. From its birth at $34.75 in 1970, gold posted its ultimate $875 high in early February, 1980. During this incredible ten year, 2500% price advance, gold mining and exploring companies returned impressive to mind-boggling profits to their shareholders. These enormous profits had not accrued to holders of gold shares since their great Bull Market of the 1930's. This occurred after gold was repriced, by President Roosevelt’s momentous 1934 edict, from $20.67 to $35 an ounce.

At that time there were virtually no junior gold explorers, and the price increases of the handful of gold producers were breathtaking. Further, this occurred during the Great Depression and its accompanying Bear Market, when common stocks were shunned by an already devastated investing public. Today, I believe that we are on the cusp of an even greater gold and gold stock price rise. And if I am correct, the junior gold exploration sector is destined to be its greatest beneficiary.

The appearance of a gold Bull Market is the first event that can generate an important Bull Market in all gold related mining stocks. In this situation, the effect of a rising gold price can be compared to an incoming tide. Just as a rising tide acts to lift all of the ships on its surface, an increasing gold price improves the real and potential profits of all companies, both large and small, that participate in the industry. It increases the prices of exploration companies as it attracts new investors to the sector as well as raises their chances for success. For the producers it generates windfall profits as their expenses remain constant while their receipts soar.

Other than those that were produced by a coincident gold Bull Market, history shows that the greatest gold exploration equity Bull Markets have been evoked by either of two events. They are the announcement of a major discovery or by the takeover of a junior company that had defined a billion dollar mineral deposit. In the case of a great discovery, investors will be emboldened to bid up share prices industry wide. This, with the hope that one of their companies will meet with similar exploration success. In effect, their earlier hopes and dreams of incredible profits will become justified by the success of a company similar to those that they own. The balance of the juniors will rise due to the market truism: "In Bull Markets even turkeys can fly". A recent example to attest to this fact is the incredible price increases of innumerable stocks of questionable merit, during the common stock Bull Market of the late 1990's.

In the event of a takeover, a great amount of fresh capital will be infused into the industry by the acquiring company. Either they will purchase the shares of the junior company for cash, or they will exchange their own easily saleable shares for those of the takeover candidate. The fortunate investors who receive the cash or sell their new shares, will typically return a significant portion of their acquired profits to the junior sector. Additionally, another important event will transpire. After the investors receive tangible evidence from the fruits of their success they will invest additional resources into the junior shares. This will further increase the amount of fresh capital available in the market.

One of the most profound investment axioms is that "everything economic can be reduced to a study of money flows". When the amount of available capital increases in a given market, it acts to drive prices generally higher throughout the entire sector. Whenever this has occurred in the junior resource market, it has always generated a significant share price rise to the overwhelming number of exploration stocks.

The excitement surrounding the Eskay Creek Mine, and the eventual takeover of its owners, Consolidated Stikine and Calpine Resources, was my first experience with a discovery and takeover induced price explosion in this market. I had missed the great Canadian junior explorer boom in the early 1980's, which was generated by the Hemlo discovery.

The unfolding of events at Eskay Creek began in 1988. The true nature and extent of the Eskay Creek deposit become evident in 1989. As the exploration work progressed the prices of Calpine and Stikine began to rise, and the "area play" heated up. Calpine was acquired early by Prime Resources for about $8 C. per share, while International Stikine was later taken over for about $68 C. per share by Corona Corporation. Corona eventually became part of Barrick Resources, now Barrick Gold.

As with the Hemlo deposit, the great Eskay Creek discovery and eventual takeovers occurred within the context of a gold Bear Market that began in 1980. During the exploration success and ensuing acquisitions of Calpine and Consolidated Stikine, numerous additional companies multiplied in price, despite the detracting gold price. Most of these spectacular gains were achieved by companies possessing properties in the same "area" as the Eskay Creek Mine. This, as investors clamored to gain exposure to a possible second discovery of a similar magnitude. Remember, important gold discoveries typically appear in clusters! The old adage, "the best place to find a gold mine is next to an existing one" evolved from the fact that nature normally creates "gold districts", not isolated ore deposits.

I have observed subsequent major discovery driven resource price explosions. Dia Met Resources discovered the first economic diamond deposit in Canada in the early 1990's. This set off a major exploration boom as innumerable juniors sought to duplicate Dia Met’s success. Dia Met saw its shares rise to over $60 C. and was eventually taken over by a subsidiary of BHP. Later, during the unfolding of the impressive mid-1990's gold rise, the enormous Voisey’s Bay nickel deposit was discovered by Diamond Fields Resources. Its share price rocketed to $148 C. when it was acquired by Inco Ltd.. This too was accompanied by substantially higher prices for dozens upon dozens of companies that participated in the search for another similar deposit. Interestingly, Diamond Fields was exploring for diamonds at Voisey’s Bay!

All of these great discoveries and ultimate takeovers were accompanied by great investor excitement. Those of Dia Met and Diamond Fields acted to generate greater inflows of capital into the industry and higher share prices, than would have occurred solely from a firmer gold price. Of even greater importance to the investor, is that all of the companies I have discussed began as penny stocks, before unmasking their great deposits!

In all of these instances, the discoveries and eventual takeovers benefitted the entire exploration industry as they reminded investors and speculators of the great rewards that were bestowed upon a successful exploration company. Not unimportantly, the emotion of greed greatly influenced the actions of the investors as each success story unfolded. Given human nature, and how it is unchanging, it is assured that the greed factor will resurface with the advent of the next major discovery or acquisition.

I remain confident that we are experiencing a secular gold Bull Market which will likely last for a number of years. Further, it is only a matter of time before one or more major discoveries and/or takeovers will occur in the junior gold sector. Numerous exploration companies have been able to obtain financing due to the recent rise in gold. This will allow them to progress important projects and, if successful, will be able to continue their development. This condition has been sorely lacking for a number of years due to the earlier resource market Bear Market.

If I am correct, those who acquire the top tier of junior gold exploration companies will benefit from both a rising gold price and from the enormous excitement that will be generated by the destined discoveries, and the likely subsequent acquisitions, of the fortunate discovering companies. It remains to be seen which junior will generate the excitement. However, given the impressive cash positions of numerous well-managed companies, it remains only a question of time.

The seeds are "germinating" at SAN!" It remains only a question of time!"

RUF