M&A Winds Swirling in the Gold Space

Consolidation in the gold mining industry continues. This week was very active. A Bloomberg article mentioned IAMGold was considering various options with advisers, although the next day IAMGold issued a statement tempering that down.

We saw Atlantic Gold get acquired for C$2.90 a share, which is an enterprise value of C$802M. St. Barbara was the acquirer in an all cash deal. The purchase price is fully valued in my opinion. Steven Dean, CEO of Atlantic Gold, and the rest of the team did a great job getting as much as they did for the shareholders. If you followed the story as closely as I did, you had an inkling that this was a highly probable outcome. Mr. Dean was not shy about it often mentioning it in company presentations and at conferences. Also, with Ryan Beddie owning nearly 30% of the company, and insiders owning nearly 35%, the liquidity event was of no surprise.

It was nice to see this deal come to fruition, although I personally left some money on the table. The stock increased 70% in USD terms since this blog posting: https://economicalpha.blog/2019/01/27/atlantic-gold-corp-phasing-in-on-what-could-be-ahead/.

With M&A winds swirling, who could be the next target? Hard to say for sure as these things can be hard to predict. It is, however, evident that the momentum to consolidate is accelerating and with this merger crossover by an Australian company into Canada, it does add another element to the equation. After all, with valuations of Australian miners at highs relative to Canadian ones, the timing makes sense.

To point out the obvious, High Grade projects, whether underground or open pit, in top tier jurisdictions like Canada remain scarce. After sitting through the acquisitions of Claude Resources, Lake Shore Gold, Richmont Mines, and now Atlantic Gold, these are the business characteristics and templates that are in short supply and that I tend to look for during my screening process. While some of the names listed below have had operating issues in the past (you know which ones they are) and continue to do so today, they do fit the profile. Of course, public companies are for sale everyday, and I wouldn’t use M&A as a sole component to an investment thesis. There’s more to it than just that. But for fun, here’s the list anyway:

  • Wesdome Gold Mines
  • Marathon Gold
  • TMAC Resources
  • Pretium Resources

Feedback always welcome.

Disclosure: I own Wesdome

4 thoughts on “M&A Winds Swirling in the Gold Space

  1. Once BSX – Belo Sun Mining – gets its permits green lighted it’s likely a buy-out candidate. Also SBB – Sabina Gold and Silver – even with the Chinese having a significant position – could be taken out at any time. SA – Seabridge Gold – needs a major copper miner to buy them.

    Like

  2. Hello,

    I own St Barbara. The move seems a bit desparate for growth, paying full price for an asset on the other side of the world, no synergies and issue stock at discount to raise cash.

    How worried should I be for the asset they’ve bought? Capex to grow production? Risk with licenses to develop the asset? How long will management of Atlantic stay etc?

    I also own Pretrium, it’s really cheap due to the worries about the grades coming down

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