SSR Mining Inc.: Let The Mania Begin

Summary

• This merger with Alacer Gold Corp. has effectively doubled the market capitalization of SSR Mining as it develops into one of this sector's major players.
• The current drill results suggest that there is potential for this company to grow organically without making any further purchases as mergers and acquisitions are rarely easy to secure.
• A strong balance sheet positions the company well for making more good quality acquisitions as and when the opportunities present themselves.
• In my view, this is a strong buy, but I do own shares in this stock and so must be considered biased towards them, so do your homework and do it fast as this sector is going places.

Introduction

On the 14^th May 2020 SSR Mining Inc. (NASDAQ:SSRM) issued some very interesting updates which included an Exploration Update, the Divesting of SilverCrest Equity Position for C$90 Million of Gross Proceeds, a merger with Alacer Gold Corp. (OTCPK:ALIAF) and the First Quarter 2020 Results.

Source: SSR Mining Inc.

There is a lot to digest here but the important point is that the markets received this update very well indeed and pushed the stock price up by 13.71% in just one trading session.

Today we will take a quick look at the factors driving the SSR Mining Inc. stock price.

News Flow

The Exploration Update focused on the Marigold and the Seabee Gold Operations. Paul Benson, President and CEO said, “For 2020, we are planning significant investment in our exploration and the results reported here justify the investment.” I have no wish to repeat all of their data here, but the drill results look very encouraging to me.

The Divesting of SilverCrest (SILV) Equity Position for C$90 Million secured a pre-tax gain of C$55 million on an investment of C$35 million over an 18-month period. Today this looks like a good piece of business with a tremendous profit achieved in a relatively short time. In years to come, we might think differently but that’s hindsight and for now, I am happy with this move.

The First quarter 2020 results were good despite the difficulties caused by the coronavirus with 107,000 gold-equivalent ounces being produced at cash costs of $824 per ounce of gold. The balance sheet looks healthy with almost $400 million in cash. As forward guidance has been suspended, I think it is prudent to wait for a little more clarity before conducting a detailed financial analysis of this stock.

Source: SSR Mining Inc.

There was also 1.8 million ounces of silver production at cash costs of $13.49 per ounce. Incidentally, silver prices are improving as the chart below shows

Chart courtesy of Stockcharts, TA by Author

The standout though was the zero-premium merger with Alacer Gold Corp. which is a major coup for SSR mining. The newly-formed enterprise expects to have annual gold equivalent production in the order of 780,000 ounces and a market capitalization around USD4.71B (ASR at C$2.86B + SSRM at C$3.71B = C$6.57 or US$4.71B)

This sort of merger will require some time for both entities to settle in and perform as one so the next quarterly report will be eagerly awaited by those who have voted with their feet and acquired this exciting prospect.

A Quick Look At The Chart Of SSR Mining

As the chart clearly indicates the market was pleased with the recent news flow and reacted by bidding this stock to higher ground. The technical indicators clearly show the wild oscillations that this stock has experienced of late along with many of the producers in this tiny sector of the market. They also suggest that a breather could be on the cards for a stock moving so far so quickly. However, I think it will be short-lived as the rally in gold and silver prices will stimulate the precious metals sector and this stock in particular.

Chart courtesy of Stockcharts, TA by Author

Conclusion

This merger with Alacer Gold Corp. has effectively doubled the market capitalization of SSR Mining as it develops into one of this sector's major players. The current drill results suggest that there is potential for this company to grow organically.

A strong balance sheet positions the company well for making more good quality acquisitions. Gold is in a bull phase and on the edge of a mania, the price of silver is also improving and both metals underpin the current valuation.

In my view, this is a strong buy, but I do own shares in this stock and so must be considered biased towards them, so do your homework and do it fast as this sector is going places.

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Take good care.

Disclosure: I am/we are long SSRM. 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.