Gold Sector: Mergers and Acquisitions Set to Soar - Genuity Capital

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. (KGLIF.PK), while the top junior development targets are Andean Resources Ltd. (ANDPF.PK), Colossus Minerals Inc. (CSIMF.PK), Comaplex Minerals Corp. (CXMLF.PK), Gabriel Resources Ltd. (GBRRF.PK), and Osisko Mining Corp. (OSKFF.PK).

"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. (NEM).

The most likely North American buyers in this market include Newmont, Barrick Gold Corp. (ABX), Kinross Gold Corp. (KGC), Eldorado Gold Corp. (EGO), and Alamos Gold Inc. (AGIGF.PK), they wrote.

Comments

[Mad Hedge F...:]

GOLD! GOLD! GOLD! This is the cry being heard worldwide by investors in the Great Gold rush of 2009, looking for a generic “short America” trade. Where in the past gold seekers used sluices, shovels, and jackhammers to extract the glittery stuff in California’s Sierras, Alaska’s Klondike, and South Africa’s Rand, today the instrument of choice is the mouse. Online traders are unleashing clicks by the millions to buy ETF’s, American Eagles, mining shares, and futures contracts. With stock traders sitting on their haunches, wondering if the Dow will hold 7,000, this is the only thing that is working right now. Gold is no longer just catastrophe insurance. Traders are buying gold more for what it isn’t, than what it is. It isn’t made of paper, made in the US, or held in custody by Bernie Madoff or Stanford Financial. The yellow metal hit a new high for the year of $999 overnight, and the risk of a “melt up” is increasing. The Street Tracks Gold Trust ETF (GLD) is now the seventh largest holder of the barbaric relic in the world. For the newly aggressive, look at the DB Gold Double Long ETF (DGP), which gives you a 200% long exposure to gold, and is up 54% in a month. Who says there is nothing to buy out there?

Feb 20 10:47 AM

[jschulmansr:]

I think there are some very good potential takeover targets out there. I also think that Yamana Gold should be listed as a buyer also.

Feb 20 12:17 PM

[mr freddo:]

I wish there was an ETF for gold exploration companies. I would invest. It seems too much of a crap shoot to pick just one.

In any event GDX seems a solid play for the next 6 months. I predict GDX will be up at least 20% over 6 months while the Dow loses 20%.

Feb 23 01:23 AM