The US$109 investment by NEM in CNL announced yesterday morning is meaningful for the gold sector as a whole. First of all even after a large gap higher CNL spent the rest of the day rallying and closed near the highs of the session, this type of price action is a vote of confidence in CNL and this transaction:


CNL.TO (Daily)

This transaction also shows that majors are on the prowl to make strategic investments in top tier companies/projects that can help them to replace reserves. In the case of CNL it also means that they have a large strategic partner going forward who will help them in various aspects of mine construction, and who may eventually snap up the entire company.

A US$100+ million investment by a major also speaks to the recent correction in the gold sector; valuations are attractive and majors aren't in survival mode desperately trying to downsize (like we saw in 2014/2015). 

We might see more similar 20% stakes taken in top tier explorers, Sabina (SBB.TO), should be at the top of that list. Withstanding a decline in gold below US$1200 we probably just reached the bottom end of the valuation range for the gold exploration space. That doesn't mean we're going to go straight up but at least we have a downside reference point.

Disclosure: Author is long CNL and SBB at time of writing. 


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