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Gold Juniors Index: How The Otis Gold Acquisition Stacks Up Against Prior Takeovers

Taylor Dart profile picture
Taylor Dart


  • Excellon Resources acquired Otis Gold last week, representing the first takeover in the junior mining space for 2020.
  • The company paid $15.12/oz for Otis Gold's modest 1.1 million ounce gold resource in Idaho.
  • Based on this, we can see that gold explorers are still not getting much respect from a higher gold price, with the average price paid still near 2018 levels.

It was a rough week in the Gold Juniors Index (GDXJ), and Otis Gold (OTCPK:OGLDF) was not spared either, despite being the first acquisition in the junior gold space for 2020. We got news on Monday that Excellon Resources (EXLLF) would be stepping in to buy Otis Gold for US$17 million, at a price tag of $15.12/oz for the company's Kilgore and Oakley deposits in Idaho. The price paid per ounce in this deal was well below the 5-period moving average paid for gold juniors, which was at $85.73 following the Continental Gold (OTCQX:CGOOF) acquisition by Zijin Mining (OTCPK:ZIJMF). This suggests that despite a much higher gold (GLD) price, gold juniors are still not getting the respect they deserve from suitors when being acquired. This is not ideal for investors hoping for massive premiums and suggests that there's no reason to overpay for development stage juniors above the $60.00/oz level.

(Source: Otis Gold Company Presentation)

Last week should have been an exciting one for investors in the junior gold space, as we got the first whiff of suitors getting an itch to make acquisitions in the area. Generally, when the sector sees M&A activity, the gold juniors respond quite favorably, as investors quickly place their bets on who might be next. Unfortunately, this wasn't the case last week, as Otis Gold was picked up by Excellon Resources at an enterprise value per ounce that was less than 20% average paid for the past five takeovers in the space ($85.73/oz). Based on Otis Gold's 1.12 million-ounce gold resource in Idaho and a $17 million takeover offer, Otis Gold was valued at only $15.12/oz. This is a massive deviation from the $93.19/oz paid for Continental Gold, and the $61.19 paid for Barkerville Gold Mines (OTCPK:BGMZF), despite a gold price

This article was written by

Taylor Dart profile picture
"A bull market is when you check your stocks every day to see how much they went up. A bear market is when you don't bother to look anymore."- John Hammerslough You can access more in-depth research, my current portfolios, my top-12 miner rankings, GDX buy/sell signals, new positions I am entering/exiting, plus proprietary sentiment indicators updated weekly for gold miners in my newsletter below. Returns Link: https://imgur.com/a/sreY6SzSubscription LinksMonthly: https://buy.stripe.com/7sI14d4b92vFdUc15cAnnual: https://buy.stripe.com/4gw28h0YXeen7vObJP - Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure: I am/we are long GLD, MGDPF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (31)

19 Jun. 2020
Hi Taylor,

Thank you for your articles, they are really good!

I have a quick question about this transaction. I am trying to figure out how did you get the figure USD 17m

In the transaction documentations they are specifying a Otis share value of CAD 0.184 and given Otis has 175,403,907 share that will make the deal value CAD 32.3m (c. USD 24.3).

This bring your paid per oz ratio to CAD 29 (USD 22)

Many thanks!
Taylor Dart profile picture
Hi Tal,

Thank you for the kind words.

I didn't have access to transaction filings at time as wrote article within a couple hours of news release, but I believe I used $0.14 C assumed buy-out which gave me C$24.5 million, or US$17 million at average exchange of $0.72 I used. It's certainly possible my math was off which means price paid would go up.

19 Jun. 2020
@Taylor Dart Thank you for the quick answer!
Taylor Dart profile picture
Thank you for the delayed correction! :P
Reading61 profile picture
Anyone know why MGDPF is up .35 cents in the premarket? Thx
Ninja Trader profile picture
I’m also curious but can’t find any news.
NUGT gained 4.25% today, the largest gain in the list of other Seeking Alpha recent articles ! NUGT is 3X Gold Miners ! March 4, 2020 at 10:28 pm PT.
No one wants low grade deposits anymore. They are not efficient. Higher grades are what companies want. Look at the discovery last week by MacDonald Mines $BMK of 736 g/t & 411 g/t. That’s what companies are looking to buy through acquisition.
Taylor Dart profile picture
Hi Brit,

I would argue that those holes are a dime a dozen when they're over less than 1 meter widths. I don't think anyone is buying out Macdonald Mines for that drill result.
They also hit 59.2 g/t over 19.07 meters and 52 g/t over 12 meters.

So I would argue you will be wrong.
Taylor Dart profile picture
It's the same hole... the residual grade on that hole is 16 meters of 0.74 grams per tonne gold. You're welcome to plug it in yourself. They've chosen to make it out over a longer interval to make it look better. If they actually hit 19.0 meters of 59.2 grams per tonne gold that wasn't high-graded, you would see the stock trading at a $75 million market cap.

It's an average hole that was reported to look great, there's absolutely nothing special about it.

I got out after the announcement. i was lucky to get break even for Otis. The reason i sold was IMO, such a low price. Management wasted 3 years and sold at a ridiculous low price.Not even close to fair value after press releases that said how well things were progressing.
Taylor Dart profile picture
Hi DD,

You were very lucky to get out at break-even, I got out years ago at a small loss and it was just a disaster, nothing was moving anywhere. Companies that can't move things forward will always get fire-sale deals, so great job selling into initial spike. If you breakeven on the hopeless companies, you're in good shape, most take a bath on them.
Just like ATAC Resources which is also in the explorer dumps, and can't seem to issue a PEA for their entire property even though they have been exploring for over 10 years! Plus they just bought a property in eastern Nevada. Go figure. Somebody is going to take them over for pennies on the dollar!
Ninja Trader profile picture
Thanks for a very good article. Long and strong Marathon Gold. Bought more on Friday’s dip.
Taylor Dart profile picture
Hi Ninja,

Flattered to hear it was of value & thanks for reading!

o-z profile picture
02 Mar. 2020
I recommend to go a big deeper in that story, Excellon got Sprott invested by 20% Otis brings Agnico to the Excellon board . This is imo not a "regluar" take over play its more kind of JV deal brings together a smal Silver producer with some exploration upside ( Mexico/Germany ) with a smal Gold story (Kilgore/ Oakley) .
Imo Sprott gives a financing for a reason and on the Board are 4 Members from Excellon 2 from Otis and 1 from Agnico also for a reason.
If they can show that they got much more in the ground as we see today that will be taken out at one day. The only point i can agree with that articel is that Excellon will never have the money and skill to build a mine, so anyone things that Sprott/Agnico and more dont know this.....
Taylor Dart profile picture
Agnico has been shareholder for years and done nothing here. The last thing Agnico is interested in is a 100,000 ounce annual producer, that's not even going to move the needle for them, they've got their hands full with Nunavut.

Sprott doesn't give financing for a reason, they're getting paid 10% a year, you'd have to be crazy not to give the financing. I would sub into that financing and do $25k at 10% a year if they want.
o-z profile picture
02 Mar. 2020
We talk again after Kilgore`s next PEA , there is potential to easy grow the resource here with infill drilling and also there are a lot of targets outside the pit . I am not sure if we can talk there about a Multi M Oz play like the say but imo its not to much to say that 3+x is in the cards and thats a little bit something !?( did you not made the first articel about Otis here 2017 ;-) ? )
Taylor Dart profile picture
I did, .then I got out of the stock for a small loss because they did nothing with the deposit in 3 years.

As for growing a deposit with infill drilling, I'm not sure how that works. Infill drilling might upgrade the resource in certain categories, but tighter drill spacing does not increase a resource.
overvloedgolf profile picture
Really don't understand why they bought this.
Taylor Dart profile picture
Hi Overvloed,

Platosa is producing at a loss, so I assume the hope is that they can make money here. The problem is, how do they fund construction? Confusing for sure, but it makes sense why they bought it in sense that they don't have anything producing at a profit currently.
Honus profile picture
Thanks for the work Taylor, much appreciated.
Taylor Dart profile picture
Hi Honus,

Thanks for reading & flattered it was of value.
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