Higher commodity prices should be good news for Canada's small-cap resource companies, but a tight credit market has conspired with a weakening economy to drive the TSX Venture Exchange down 35 per cent so far this year.
"We've harped and harped on the lack of willing investors to provide capital to the juniors," Cannacord Adams wrote in this week's Junior Mining Weekly newsletter. "However, we believe it's only a matter of time until investors return to the junior mining sector."
That return may be under way, with a wave of consolidation washing over the gold sector. company companyid="181710" -->company companyid="162024" -->Kinross Gold Corp. has recently bid $1.2-billion for Aurelian, while Goldcorp Inc. bid $1.5-billion for Gold Eagle.
"In both cases, Kinross and Goldcorp are taking advantage of a relatively strong period of stock appreciation and are using an equity component to fund at least part of the acquisition," the report says. "This tells us that, on a relative basis, the majors see value in the junior sector and that the discounted junior valuations represent an opportunity for value accretion through acquisition."
So who's next? Cannacord Adams prepared a list of companies that could be acquired — or do the acquiring — in the coming months.
Andina Minerals Inc.
2007 earnings: $1.7-million
2007 revenue: $4.2-million
Assets: $62-million
Shares: Closed Wednesday at $3.16
An exploration company with five projects in Chile, Andina has an estimated 2.9 million ounces of gold in its portfolio. Its main holding is situated 120 kilometres east of Copiapo and close to other mining projects by companies such as Kinross, Yamana Gold, and Barrick Gold Corp.
AXMIN Inc.
2007 earnings: $5.9-million loss
2007 revenue: $2.1-million
Assets: $79-million
Shares: Closed Wednesday at 23 cents
AXMIN describes itself as a gold explorer that looks for mines in "newly democratic" countries, where it can get in the market early. It is nearing the end of a feasibility study in Central African Republic and is also exploring in Sierra Leone.
Capstone Mining Corp.
2007 earnings: $22-million
2007 revenue: $57-million
Assets: $144-million
Shares: Closed Wednesday at $3.35
Fresh off a record quarter, Capstone is making money in Mexico. The bulk of its cash was made selling copper, with smaller amounts of lead and zinc also contributing.
Corriente Resources Inc.
2007 earnings: $15-million loss
2007 revenue: $5.2-million
Assets: $178-million
Shares: Closed Wednesday at $4.55
Corriente controls 62,000 hectares of land in Ecuador. It is in the midst of negotiations with the government to start work on a copper project, but needs to clear regulatory hurdles before further exploration can go ahead.
CrestonMoly Corp.
2007 earnings: $4.9-million loss
2007 revenue: $149,000
Assets: $63-million
Shares: Closed Wednesday at 36 cents
Creston believes it is sitting on one of the world's largest undeveloped molybdenum resources in the Western hemisphere. Its Mexican site has an estimated 169-million pounds of the metal, and the company continues to drill test holes.
Detour Gold Corporation
2007 earnings: $11.9-million loss
2007 revenue: $1.1-million
Assets: $128-million
Shares: Closed Wednesday at $17.70
Detour Gold is working on a project at Detour Lake in northeastern Ontario. The site produced 1.8 million ounces of gold from 1983 to 1999, and the company hopes to get at 10.8 million ounces of gold in the measured and indicated category.
Hathor Exploration Limited
2007 earnings: $2.2-million loss
2007 revenue: $225,000
Assets: $38-million
Shares: Closed Wednesday at $3.72
A junior uranium explorer, Hathor has projects in the Athabasca Basin in northern Saskatchewan. The area contains all of the country's producing uranium mines, and accounts for 25 per cent global production.
Orezone Resources Inc.
2007 earnings: $3-million loss
2007 revenue: $2.2-million
Assets: $311-million
Shares: Closed Wednesday at $2.55
Orezone has properties in Burkina Faso and Niger, which it is exploring for gold. It has 5.3 million ounces of measured and indicated gold, and holds 3.1 million ounces in reserve.
Rainy River Resources Ltd.
2007 earnings: $3.6-million loss
2007 revenue: $594,000
Assets: $59-million
Shares: Closed Wednesday at $2.55
This exploration company is focused on a gold project in northwestern Ontario, south of Kenora. Rainy River has drilled 155 holes, and believes it has discovered seven potential gold zones.
Sherwood Copper Corporation
2007 earnings: $40-million loss
2007 revenue: $29-million
Assets: $222-million
Shares: Closed Wednesday at $4.95
Sherwood owns copper mines in the Yukon and British Columbia. It mined 12.8 million pounds of copper from the Yukon mine in its last quarter, compared to 11 million in the year-ago quarter.
There are a lot of good companies out ther looking for a buyer - at the very least the shareholders deserve the complete focused attention of our management team to ensure we get on these lists. Personally I'm a big fan of HAT but what do I know I'm 150k in the hole on GL alone. Have a good day