Very Interesting!!!!!VANCOUVER – Let’s make this easy. Cash-rich majors and gangly mid-sizers will use cash to buy junior resource companies.
Large producers of metals (gold, copper, silver, iron ore) are combing Colombia, parts of Africa, Nicaragua, Nevada, Mexico and Canada for purchase candidates. In a year when resource companies’ merger and purchase activity is briskly paced, before year’s end such transactions will reach a torrid pace.
I spoke with many of my contacts on the central questions: Who is buying and where are they buying? Ari Sussman of Continental Gold (TSX: T.CNL, Stock Forum), David Meyer of Norvista Resources, Ian Slater at Red Eagle Mining (TSX: V.RD, Stock Forum), Bob Allen at Grupo de Bullet, Michael Nikiforuk at African Gold Group (TSX: V.AGG, Stock Forum) and several others were among my source list.
This is what we call quick and dirty. No long quotations from these bankers, geologists, property owners and CEOs. Just this: Most buyers will use cash because they do not want to see their existing equity dissipate. Most buyers will employ acquisitions or mergers, and in some cases 10 percent strategic stakes, to acquire exploration talent, documented metals resources or nearby properties.
Several, B2Gold (TSX: T.BTO, Stock Forum) is the current example, will venture into regions, in this week’s transaction Namibia, to expand their jurisdiction list.
“The companies being taken over might think it’s easier to merge than to try and project finance in the current market,” says Mr. Slater, whose Red Eagle is active in Colombia, one of my favored jurisdictions. He is using project finance as a verb here.
I see several mid-sizers, like B2Gold, Yamana (NYSE: AUY, Stock Forum), Iamgold (TSX: T.IMG, Stock Forum), Kinross Gold (NYSE: KGC, Stock Forum), US Gold (TSX: T.UXG, Stock Forum) and a host of silver rockets, among them perhaps First Majestic (TSX: T.FR, Stock Forum) or Endeavour Silver (EXK and TSX: T.EDR, Stock Forum), looking for tightly-run prospectors and imminent metals producers with one eye on the clock. The other eye is on the most-actives list on the Canada and Australian stock market screens.
“Not sure how many deals will get done at these cheaper junior valuations,” Mr. Sussman tells me from Toronto. Ari Sussman runs Continental Gold, a Colombia gold prospector. “Apparently Galway (TSX: V.GWY, Stock Forum) has been for sale since the spring.” Galway also is active in Colombia and recently saw its shares trade briskly higher on zero published news.
My Major Activity candidates are here in this space for all to see … and for free. I own nearly all of them and intend to purchase more at fire-sale prices. I am an insider at none of them. (See disclosures at bottom please.)
In Colombia, even though he calls most prospector properties that he does not already own “moose pasture,” Gran Colombia (TSX: T.GCM, Stock Forum) Chairman Serafino Iacono at some point will purchase privately or publicly-held exploration companies in his neck, or should I say necks, of the woods.
Others already looking in Colombia almost surely will be knocking around Antioquia’s Middle Cauca Belt, where success stories after several years of hard work include Sunward Resources (TSX: V.SWD, Stock Forum), Bellhaven Copper & Gold (TSX: V.BHV, Stock Forum), Colombia Crest (TSX: V.CLB, Stock Forum) and one or two others, Solvista (TSX: V.SVV, Stock Forum) for one, maybe Seafield (TSX: V.SFF, Stock Forum) now that it has new execs at the helm. Of all of them, I think those in and around Titiribi, a proven mining district with good to very good grades and a willing work force, will be first to get “transacted.” That would be Sunward, whose shares I do not own, Colombia Crest, whose shares I do not own, and Bellhaven, whose shares I own “in size,” as they say.