Gold Companies are Snapping up Canadian Juniors
M&A activity in the gold sector has been hot, hot, hot this month.
Since March 10th we’ve seen three major acquisitions of junior gold mining companies – which is not surprising when you consider that gold stocks have been underperforming of late. Gold producers that are sitting on a lot of cash have been able to capitalize on discounted prices, and with interest rates being so low, there’s also a lot of cheap money available to finance these kinds of M&A transactions.
Despite a shaky chart over the last few months, we remain bullish on gold in the long-term. We think there’ll be a lot more M&A deals happening in the sector in the coming months, especially acquisitions of juniors that are in possession of high quality deposits that are in production or near production.
Let’s take a look at what’s happened this month.
Newmont Buys Copper-Gold Asset GT Gold
The Deal: Newmont Mining (NYSE: NEM; TSX: NGT) announced on March 10th that it had entered into a binding agreement with GT Gold (TSX-V: GTT) in which Newmont would acquire the remaining 85.1% of shares of GT they didn’t already own for a total of US $311 million. Each share was purchased for C$3.25 per share.
What Newmont Bought: GT Gold has been engaged in the advancement of its wholly owned 47,500 hectare Tatogga property, located in the renowned “Golden Triangle” near Iskut, British Columbia. GT Gold has made two significant discoveries on the property already – including “Saddle South”, a precious metal rich vein system, and “Saddle North”, a gold-copper rich porphyry system.
We wrote an article a few months back about how mega gold producers like Barrick Gold would be looking to buy up copper-gold projects during a less-than-stellar gold market, and it looks like Newmont is taking the same approach. Where there’s gold there’s copper, and in the midst of the global electrification movement and the transition to renewable energy, there is a steadily rising demand for copper, vs a current limited supply. We wouldn’t be surprised to see more of the majors make a play for high quality junior gold-copper projects in the future.
Australian Evolution Mining Expands Stake in Canada’s Red Lake District by Acquiring Battle North Gold Corp.
The Deal: Australia-based Evolution Mining Limited (ASX: EVN) announced on March 14th it had entered into a definitive arrangement agreement with Battle North Gold Corp (TSX: BNAU; OTCQX: BNAUF), in which Evolution will acquire all of Battle North’s issued and outstanding shares for a price of C$2.62 per common share in cash, for a total of approximately C$343 million. The purchase price is a 46% premium on the previous closing price of Battle North, so Evolution must see a lot of future value in the project.
What Evolution Bought: Battle North has been working to advance its Bateman Gold Project in Canada’s Red Lake district, home to many other producing and exploration stage mining projects including one of the world’s largest gold mines, the Red Lake Gold Mine, which Evolution purchased from Newmont Goldcorp in 2019 in an all-cash deal worth US$475.
The Bateman Gold Project is a resuscitated underground mine project formerly known as the Phoenix Gold Project, which operated briefly in 2015 before its operator, Rubicon Minerals (now Battle North), halted operations and entered creditor protection. According to a feasibility study released last Fall, the Bateman project has a projected 8.2 year mine life with 603,000 ounces of production. Evolution sees the acquisition as a strategic way to expand its operations in the Red Lake district.
Gran Colombia Buys Junior Gold X Mining in all-Share Transaction, Increasing its Presence in Latin America
The Deal: On March 15th, Canadian junior Gold X Mining (TSX-V: GLDX; OTCQX: GLDXF) announced it had agreed to be bought out by mid-tier gold producer Gran Colombia Gold (TSX: GCM) in an all-share transaction valued at C$319 million. Gold X will be acquired on the basis of $0.6948 a share, implying a consideration of C$4.10 per Gold X share. This exchange ratio represents a premium of 39% based on the closing price of Gold X shares on the TSX-V.
What Gran Colombia Bought: Gold X has been working to bring its gold project Toroparu, based in Guyana, into production. The mine has projected reserves of 4.5 million ounces of life-of-mine gold production over a 24-year mine life.
Gran Colombia chairperson Serafino Iancono commented, “The contemplated acquisition will provide Gran Colombia with an opportunity to add a large-scale, long-life Latin American gold development project to its portfolio. When this transaction is consummated, the Toroparu gold project will join our Segovia Operations as cornerstones of our long-term growth strategy.”
Takeaway: At the end of the day no one has a crystal ball, so it’s important to own stocks that you like for reasons aside from just their potential to get bought out. If you can find a high quality deposit that’s backed by a management team with a proven track record of getting great returns for their shareholders, you’re on the right path. We wrote a report on one such company here, and we’ll be bringing you our next pick a few weeks from now. Stay tuned.
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