The gold sector could see a flurry of takeover activity in the coming months, according to Genuity Capital Markets analysts Tony Lesiak, Christine Healy and Michael Gray. With that backdrop, they have broken down a number of potential targets.
They believe that 2009 could be a big year for gold M&A for a number of reasons: rising bullion prices, the growing valuation disconnect between juniors and seniors, recent financings by the seniors, and a shortage of internal growth projects for the seniors.
So who could get bought? The analysts ranked 10 junior gold producers and 20 junior development companies on the unusual measure of estimated total acquisition cost per attributable, recoverable ounce.
On that basis, the top three producer targets are Allied Nevada Gold Corp., Mineral Deposits Ltd., and Kirkland Lake Gold Inc. (OTC:KGLIF), while the top junior development targets are Andean Resources Ltd. (OTC:ANDPF), Colossus Minerals Inc. (OTC:CSIMF), Comaplex Minerals Corp. (OTC:CXMLF), Gabriel Resources Ltd. (OTCPK:GBRRF), and Osisko Mining Corp. (OTCPK:OSKFF).
"We recommend a basket approach to investing in any of these names given the speculative and single-asset nature of the companies," they wrote in a note to clients.
With the exception of Gabriel, these are all companies that are often considered takeover targets. Gabriel has problems with NGO opposition in Europe, but the analysts figure that if the company can ever get government approval for its Rosia Montana project, it would be a logical target for Newmont Mining Corp. (NYSE:NEM).
The most likely North American buyers in this market include Newmont, Barrick Gold Corp. (NYSE:ABX), Kinross Gold Corp. (NYSE:KGC), Eldorado Gold Corp. (NYSE:EGO), and Alamos Gold Inc. (AGIGF.PK), they wrote.