Monday, October 04, 2010

Gold Fever: Canada's junior gold miners sparkle as M&A targets TNR.v,,, ABX, GG,,,, SGC.v, AEM, BVN, NEM, FCX, GDX, HUI, XAU, BVA.v,, BVG.v, BTT.v, GBN.v


  We have our own M&A candidates in Lithium and REE, Copper and Gold space on this blog, as well: Goldstone Resources is primed for take over by Premier Gold for its share in the growing Hardrock deposit, Tongling - Chinese Copper and Zinc giant is taking now more than 30% in the Canada Zinc Metals and TNR Gold with its recent cyber activity could be a target for its stake in Los Azules, according to some blogs:

"We hope that, finally, market will find out that TNR Gold has gold not only in its name, but holds now 100% of Shotgun Gold deposit in Alaska. With all recent cyber activity in the market we thought that there is no hope in justice for this junior and nobody will ever honor their word again. Nova Gold has proved us to be wrong here. We guess that such a deal took some time and we are raising our hat to the Nova Gold management, who fulfilled their commitment.

Even more, apparently, they can see the value and upside in all assets of TNR Gold in Gold, Copper, Lithium and REE. The deal is done with shares and warrants of TNR Gold. Nova Gold was holding the stake in TNR Gold before and now they have increased it just under 10%. Whoever has been shaken the tree with automated selling, he will not be able to get any more cheap shares in this junior. Management and insiders hold 50% of the company. Among other shareholders is another major - Barrick Gold. Canada Zinc Metals holds a strategic stake in the TNR Gold and Chinese Togling is buying now more than 30% in CZX.v In this light, trip to China will be very interesting: TNR Gold holds REE project in Canada: Big Beaverhouse and with all recent publicity around REE, we can expect some new developments here as well."

  We have found that Argentina and Mining 101 has provided an interesting view on modern M&A warfare and tools used in Canada, where illiquid small cap junior miners provide a fertile ground for potential share price manipulation. We must admit that looking at TNR Gold shareholders and its capital structure we can hardly believe that it could be true, but we better to provide you with all opinions, so that you can always make your own decisions. 

Please, do not forget, that we own stocks we are writing about and have position in these companies. We are not providing any investment advise on this blog and there is no solicitation to buy or sell any particular company here. Always consult with your qualified financial adviser before making any investment decisions.

 But back to M&A in the gold space - we have wrote about it before and the story is making its way to the headlines with every deal made. Junior miners will be the next driving force of this bull and every deal will attribute more value to the Gold oz in the ground.

"First Gold will make new all-time high, second will be M&A play: Majors will shop for Juniors with resources in the ground. Here is the double-game - Gold is moving up and Majors' production and Reserve Base is going down. If you like more leverage you are welcome to Silver market. Place to be is in stories will strong management, growing resources and stable political situations. Markets will be volatile by all means and political tensions will be driving this Gold Bull as well."


DEALTALK-Canada's junior gold miners sparkle as M&A targets

Mon Oct 4, 2010 8:06pm GMT

* High gold prices fuel record M&A activity

* Top producers pay up to $1,100/ounce in ground

* Juniors merge to make strong acquisition targets

(In U.S. dollars unless noted)

By Julie Gordon and Pav Jordan

TORONTO, Sept 16 (Reuters) - When junior miner Andean Resources (AND.AX: Quote)(AND.TO: Quote) sold itself to Goldcorp (G.TO: Quote) for C$3.4 billion ($3.3 billion) last month, it cashed out for about 100 times the amount it had invested in its flagship Cerro Negro gold project.

A host of Canadian gold juniors could pull off a similar feat over the next 12 months as big gold miners rush out to buy smaller companies that own reserves, instead of looking to make their own discoveries.

"Gold miners are just not finding any new gold, meanwhile, the demand is increasing," said Maison Placements analyst John Ing. "So the major gold miners are stuck on a treadmill."

"What we are seeing is that gold companies are paying premium dollars for ounces in the ground," he said. "It's faster and it's easy."

With gold prices seen rising throughout 2011, securing the next big reserve is essential for the top-tier miners.

That has the juniors jumping on the M&A bandwagon, as they look to make themselves more attractive as acquisition targets.

Last week, Gammon Gold (GAM.TO: Quote) offered $288 million to buy out Capital Gold (CGC.A: Quote), in a bid that strengthens its position as a leading Mexico-focused gold producer.

To secure Capital's resources, Gammon had to beat out a hostile bid from Timmins Gold (TMM.V: Quote), highlighting growing competition for viable reserves as gold prices hold their highs.

The Gammon-Capital deal combines the assets and exploration projects of two smaller companies to create the type of mid-tier player that will quickly come into the eager sights of the large-cap miners.

"The biggest gold companies were built by consolidating mid-sized gold companies with existing assets," said Dahlman Rose analyst Adam Graf, adding that companies need to keep acquiring new resources, or risk getting hit where it hurts.

"You've got a lot of big companies, that have a lot of tired assets, which are coming to end of life," he said. "Their costs are going to go up, and their production is going to go down."

Higher costs on lower production is exactly what Kinross Gold (K.TO: Quote) was trying to avoid when it paid $7.1 billion to buy Red Back Mining (RBI.SG: Quote) back in August.

The deal vaulted Kinross into an exclusive group as one of the top five gold miners in the world by market capitalization, and will bump 2010 production up 23 percent to 2.7 million ounces. The Toronto-based company is projecting 2015 gold production of about 3.9 million ounces.

Gold prices eased on Monday, after hitting a record high of $1,315.60 an ounce on Friday.

Meanwhile, mining-related mergers and acquisitions are happening at a record pace in 2010, with 40 percent of all global deals involving gold companies, according to PricewaterhouseCoopers.

Analysts say the price of gold coupled with the M&A climate has created a perfect storm that will likely send shares soaring for juniors like Guyana Goldfields (GUY.TO: Quote), Osisko (OSK.TO: Quote) and Aurizon (ARZ.TO: Quote), which are all sitting on major assets.


"I think there is a bunch of stuff to come in gold," said Dan Barclay, head of mergers and acquisitions, Canada, for Bank of Montreal (BMO.TO: Quote). "I think CEOs of gold companies believe prices are going to go higher."

Prior to its deal with Capital, Gammon was on the target list of promising junior miners for most companies in acquisition mode. Shares in the Halifax-based company have jumped over 36 percent in the past 90 days.

Toronto-based Guyana Goldfields has soared 55 percent in the same time period, with its flagship Aurora mine set to start production in the second half of 2012.

Meanwhile Osisko, which is in the process of developing its massive Malartic project in resource-rich Quebec, plans to be a million ounce per year producer by 2016, sending its shares up almost 35 percent in the last three months.

In the 90 days leading up to its plum purchase by Goldcorp, shares in Andean Resources rose about 73 percent, as positive numbers increased the allure of its 3.1 million ounce Cerro Negro project in Argentina.

While the project has the potential to lift its resource base by 50 to 70 percent, analysts have valued Goldcorp's bid for Andean at around $1,100 per ounce of gold reserves.

"The kicker here is the finding cost," said Ing. "Andean's cost of finding those 3 million odd ounces was only $15 an ounce."

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