Ventana got closer to $400 / oz in a very exciting junior resource market but currently we're trading in a market where several juniors are trading for just more than cash and most gold companies are trading for the cheapest they have since 08/09 relative to the price of gold.
In a market like this where junior resource stocks are hardly being given the time of day and people continue to throw away shares like "baby with the bathwater" syndrome it's hardly realistic to expect a valuation above $100 / oz by the market.
Having said that those acquiring usually pay a 30-50% premium minimum for junior gold equities and would likely pay $125 - $150 / oz for GWY based on Ventana getting much more per ounce.
I think a fair revaluation by the market based on peers would be to the $1.85 - $2.25 level based on the coming Resource Estimate. In an acquisition scenario and taking out all of GWY's upside potential in their properties I think $125 - $150 / oz would be much more fair and likely which would be a $400~ M dollar take-out or $3.25 + a share.
- The bolded excerpt below is taken from Rick Rule a week ago but I think it's very true regarding the gold stocks.. The retail and institutional investors can choose to participate in the undervalued juniors if they like or they can stay away due to a tough year in the sector, but the ultimate fate of these juniors will be decided by major gold companies and what they're willing to pay. (Based on past examples juniors are trading for less than 50% of what they have been acquired for in the past).
I think the buyers for the exploration stocks, the impetus for the market in exploration stocks this year will be takeovers. The companies that have done a good job, although they may not find traction among institutional or retail investors, will be taken over by larger mining companies.... “These larger companies have both the need to replace production and the financial strength to complete the takeovers and to build out the discoveries that have been made by the juniors. The takeovers are very often value related, rather than market related. So, I think you would see, in this instance, higher premiums than you would normally see even in a bull move. If the industry sees $2 billion in discounted free cash flows and they see a market cap of $600 or $700 million, they are willing to pay $1.3 billion to secure net-present value. So, it’s possible that you will see 70%, 80% or even 100% premiums in bad markets, for good assets, in select names.
We are also in a major discovery phase and although the market won’t recognize it or won’t appreciate it until its occurred, people who position themselves in advance of this will be in a spot where they can really make some money in 2012. The industry needs new deposits and the industry has the money and the capacity to execute the takeovers and to build the mines that have been discovered by the juniors. Also, regarding the discovery theme, people are burnt out with the mining sector and I suspect this is right before they begin to enjoy the benefits of the discovery cycle. Some of your readers are old enough to remember some of the discoveries we enjoyed in the mid-90s. Things like Diamond Fields, as an example, went from $4 to $160. Arequipa Resources went from 30 cents to $30. It’s my belief that we are going to re-enter a discovery cycle and I would be surprised, frankly, if we didn’t have four or five names that made 50 or 100 fold returns on pre-discovery market capitalization. We have a perfect situation right now where the expectation that the market has for the sector is non-existent. These quality companies are in the final push for discovery and yet nobody is anticipating any exploration success. The last sector of the market to have money is the industry itself, and the industry has both the ability, by way of capital, and the need to pull the trigger, and mark my words, they will pull the trigger on big discoveries.”