TORONTO - More merger and acquisition activity should come in the North American gold junior space as a result of soaring gold prices, Lake Shore Gold CEOTony Makuch said on Thursday.
"There is definitely a need for that," he said.
"I'm surprised we (the industry) haven't been able to do much of that."
Last year, Lake Shore bought junior West Timmins Mining, to add to its holdings in the Timmins mining camp.
Higher gold prices of the last few years had led to an influx of juniors trying to get their mines built, such as Lake Shore Gold. Many of these projects were now coming on stream, and the market was beginning to understand the various companies 'relative worths, according to Makuch.
"We are starting to see a lot more requests for confidentiality agreements. We are also getting a lot of people asking us to sign confidentiality agreements with them."
When companies ask to perform a due diligence on a potential takeover target, the two will generally sign a confidentiality agreement.
Lake Shore Gold is building mines in the Timmins area of Northern Ontario. It's flagship project, the Timmins mine, will produce 50 000 oz of gold this year, reaching 120 000 oz to 200 000 oz in 2011, Makuch told Mining Weekly Online.
The Bell Creek mine would likely reach commercial production in 2012, at a level of 75 000 oz/y to 200 000 oz/y, he said.
Thunder Creek, located just South of the Timmins mine, would produce at levels between 120 000 oz/year and 150 000 oz/year, depending on grades.
"We are targeting total production of very close to or above 300 000 oz/year by 2013," Makuch said.
GOLD PRICE
Gold prices have climbed rapidly this year, reaching levels around $1 240 this week, near record highs. Since May 7, gold has only briefly slipped below the $1 200/oz mark twice.
Gold hit a new all-time high of $1 251/oz last week.
Makuch said the yellow metal staying at levels of $1 250/oz would be "realistic" in the medium term.
"The gold price is tied to supply and demand. There's increase in demand and a tightening in supply. The gold price is going to stay strong."
Demand for the yellow metal has vaulted as investors buy it instead of US dollars and Euros. Greece's debt woes have accelerated this.
The world's biggest gold exchange traded fund, US-based SPDR Trust was holding a record amount of the yellow metal on Thursday.
"I don't see the gold price weakening in Canadian dollar terms," said Makuch. That's because the price of gold has recently developed an inverse relationship to the US dollar, meaning gold goes up when the US loses value.
"We have a natural hedge in Canada in the US dollar."
TSX-listed Lake Shore, which also owns properties in Mexico, was trading at C$3,15 a share on Thursday morning, giving the company a market capitalisation of C$1,1-billion.
The company reached a 2-week high of C$4,37 a share in November last year.