M&A to continueToday, the Global Gold Index is down about 5.3%. But some juniors are suffering even more.
Keegan Resources Inc. (KGN:TSX; KGN:NYSE.A) shares suffered a double-digit decrease on its announcement of results of the prefeasibility study at its Esaase Gold Project in Ghana. Two names that I like,
Premier Gold Mines Ltd. (PG:TSX) and
Atacama Pacific Gold Corp. (ATM:TSX.V), are down 11%. There was some pretty harsh treatment of
Silver Wheaton Corp. (SLW:TSX; SLW:NYSE), which is down 10%. Senior gold company
Centerra Gold Inc. (CG:TSX) is down about 12% after having been one of the best performers year-to-date. In some cases, there is extra pressure on stocks that had done relatively well earlier in the year.
TGR: How could this impact M&A activity?
Grayd Resource Corp. (GYD:TSX.V) recently agreed to be acquired by
Agnico-Eagle Mines Ltd. (AEM:TSX; AEM:NYSE).
SB: I do think that M&A will continue, although it's been a bit dry for several months. There are some names in the sector that have "potential M&A" stamped on their foreheads. There has been a disconnect between where spot gold has gone and equities. Companies that used to trade on a premium to net asset value, or at least a premium spread to their junior counterparts, can't easily afford to buy their junior counterparts because their share price multiple doesn't allow it. Normally, M&A is always about the expensive senior paper buying the inexpensive junior paper. Companies can show accretion that way.
Premier Gold, Atacama Pacific,
Allied Nevada Gold Corp. (ANV:TSX; ANV:NYSE.A) and
Detour Gold Corp. (DGC:TSX) have valid M&A arguments behind them. Allied and Detour, a larger-cap producer and non-producer, are a little less certain because some of the easier money has already been made.
Premier Gold's largest asset is the Hardrock Project in Geraldton, Ontario, a resource of 3.6 million ounces (Moz.) that is likely headed to 4 Moz. with the addition of the assets from the Goldstone acquisition. The greater project is going to be renamed the Trans-Canada Project. We believe that there is upside to the resource and our targeted valuation.
The reason why I say it is an M&A target, primarily for
Goldcorp Inc. (G:TSX; GG:NYSE), is because of the Rahill-Bonanza joint venture in the heart of Red Lake. The Rahill-Bonanza joint venture is 49% Premier Gold and 51% Goldcorp.
The other asset in Premier's portfolio is the PQ North Project, north of Goldcorp's Musselwhite Mine. There is potential for Musselwhite to continue to strike to the north and eventually run up against a boundary with PQ North.
link to full article: https://www.theaureport.com/pub/na/11096
Premier's other asset, the Saddle Project in Nevada, is a non-compliant resource that the company is looking to drill by the end of this year, with a chance of a 1.5 Moz. or larger resource. That is in close proximity to Newmont Mining Corp. (NEM:NYSE).