Newmont Grabs Miramar: Who's Next on the Gold Takeover List?

With the gold price breaking records, and the dollar sinking into the abyss, the major gold miners are planning for the future and shoring up their resources through acquisitions. The latest of which is Newmont’s (NEM) announcement that it would acquire 100% of Miramar (MAE/TSX) in a $1.5 billion all-cash transaction. Miramar’s shareholders were promptly rewarded with a 23% single-day gain. Some analysts are anticipating rival bids, which could push up the value of Miramar to levels even higher than their $6.31 close on October 10th. If you have followed Miramar over the years, you are well aware of Hope Bay, which is considered one of the largest undeveloped gold projects in North America.

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So, who is next on the gold miner acquisition list? With takeover plays enjoying 20-40% gains in the days following an announcement, this is information every investor would like to know. While nobody can say for sure, we can run our list of miners through a filtering system and output the ones we believe have the characteristics making them prime for acquisition by a resource-hungry major. Amongst other factors, we have considered market cap , resource estimates, production potential, politically stability, access to infrastructure and management/business model. Keep in mind that many of the same qualities that make these companies prime takeover targets, make them sound long-term investments, takeover or not. So it should come as no surprise that these companies are also listed in our “Top 8 Gold Stocks” article. Without further adieu, here is what we think majors’ shopping list might look like:

Golden Star Resources (GSS)

With production estimates at nearly 500,000 ounces of gold and increasing throughput at their processing plant, we like Golden Star as a takeover play. After having a record quarter for production, they have increased forecasts for both their Bogoso/Prestea and Wassa mines. While operational and permitting hiccups have suppressed their stock price, we see the company moving past these issues and surprising the street with next quarter’s numbers. Bill Cara, has also called GSS a takeover target, and it is on our list of the "Top 8 Gold Stocks to own."

Note: We first recommended GSS on September 29, 2006 when it was at $2.74, and since then it has climbed 51% is just over a year.

Seabridge Gold (SA)

Seabridge has 100% interests in the Courageous Lake project in the Northwest Territories. It is believed to be Canada’s largest undeveloped gold project with outstanding exploration potential. It also owns the Kerr-Sulphurets project, and the Red Mountain project in British Columbia; the Grassy Mountain project, and the Quartz Mountain project in Oregon; the Hog Ranch project, and the Castle/Black Rock property in Nevada; and the Noche Buena property located in Mexico. In total, it has 10.2 million M&I ounces, and another 22 million inferred ounces. Seabridge has been expanding its resource estimates at a blistering rate. It remains fully exposed to the gold price with no hedging, no debt and $30 million cash on hand. While it may have a strategy of “attracting producers as partners,” we think some of those producers will be going for more than a mere partnership.

Note: We first recommended SA on September 6, 2007 when it was at $28. It has since rallied 17% in just over a month.

Newcrest Mining (NCMGY.PK)

Rumors of Newcrest being acquired have been floating around for years. After all, it is Australia’s leading gold mining company, that boasts a relatively low trading price, and a politically stable home. Newcrest currently mines about 1.5 million ounces of gold a year, and is expanding output. BHP Billiton (BHP) Chief Executive Chip Goodyear was quoted as saying BHP was underexposed to bullion, and would look at buying a gold mine if the right one came along. The first company mentioned was Newcrest Mining. While its AU$12B market cap is much higher than our other takeover targets, it is still within the reaches of a BHP, Rio Tinto (RTP), Freeport (FCX), or Barrick (ABX).

Note: We first recommended Newcrest on September 06, 2006 when it was at $16. It has since gained 57% in just over a year.