Mergers & Acquisitions Will Rule 2012 in Mining Investments
Al Korelin discusses mergers and acquisitions with Marshall Berol of the Encompass fund and Ray Navis, a private investor in the resource sector. This interview took place at the Cambridge House California Investment Conference.
Endeavor & Great Panther Silver would be a great merger Marc! I invest in both companies, hit their websites regularly, but had not heard any official releases on that yet, but their combined force would be awsome.
I also think Typhoon Exploration is a possible takeover silver play by Aurizon Mines as they are joint venture on the Fayolle property. Aurizon is going to be putting a second mine into production this year, but the Fayolle is next on the batting order which could be their 3rd mine in a year or so. Aurizon has to be considering that Typhoon would be a good addition to their portfolio of properties. This would give them 100% ownership in Fayolle at that point.
I welcome some of these mergers as it will expand the exploration potential for larger producers where there will be good synergy.
Just to clarify Aurizon is a gold producing company with a strong silver credit on it’s properties, and the Fayolle property mentioned is primarily gold but has a ton of silver. The other properties Typhoon have also have both gold/silver balances so it isn’t just a silver play but would still fall into the trend of Gold producers acquiring more gold properties with strong Silver or Copper byproducts.
There are also a number of Uranium miners picking up Rare Earth properties to get in on that market, and a number of gold miners selling their uranium properties or joint venturing with uranium explorers. These could potentially be other great takeover potentials.
If you own Typhoon and Aurizon, you should own Niogold (NOX.v) too. Aurizon is sure to take them out at some point. AZK is spending $4.9M on Nio’s Marban property this year, and spent $4M in 2011. They have spent over $7M to date on Fayolle and are planning an additional $1.2M this year. Aurizon is now rated a strong buy (#1 rank) by Zack’s. I own all three.
Another absolute bargain at this very moment is Claude Resources (CGR-AMEX). The current overhang is coming from former St. Eugene holders who were paid in CGR shares (9M+). It makes sense that they would sell in order to replace St. Eugene with something similar. CGR was well over 10x the market cap of St. Eugene, so is not a similar spec. It’s trading at 1.25x book; has a forward PE under 7; $35M in cash; and plenty of exploration upside. They plan to drill 130,000 meters in 2012. I own it and will buy more if it goes lower.
Hi Matthew,
I worked with both Claude and Niogold in the past.
Unfortunately, neither company has performed via share price for an awfully long time.
Claude is a great little producer. I have visited the mine and I used to know the management team fairly well. Good people. It is a solid company but the share price has really not done much.
Regarding Niogold, kind of the same story. I will say that Rock is a hard working individual and his staff (at least those that I met about five years ago) are good and serious people. Mike Iverson is also a good guy who is a very hard worker.
Maybe the share prices of these companies will start to perform, but it has been a while.
Best,
Big Al
I know what you mean, Al, but CGR did nearly triple in the second half of 2010. Then, like it’s peers, it spent 2011 in a downtrend. Niogold is basically where it was 1 year ago, but compared to most of the sector that is a superb showing. It recently broke out of its trading range in the mid-.30’s. As you know, every company and project is at a different place in their value-adding endeavors at any given time. Claude is a new holding for me because the current price represents a great value, and I believe that the time is right. Remember the old saying: don’t tell me what to buy, tell me when to buy.
I have always done better by buying companies with unrecognized potential. One example is Almaden. It’s a long term holding for me that I’ve had for years. It has great management, and is the best project generator out there. It has strong financials and never dilutes shareholders. After 2008 it was dead money for 2 years but I kept accumulating. In August 2010, with my cost basis around $0.75, they released drill results that carried the share price to $5.25 in a few months. So I’m not usually interested in buying the widely followed, fully priced plays of the sector. Another example is Exeter. I had doubled my money and was done with it by the time the guys at Casey Research decided it was a strong buy again. It hasn’t done so well ever since. I guess my point is that conditions/prospects change all the time on a case by case basis. Which is why we have the mantra: Past performance is not an indication of future results. Winners are a “hold” if you already own them, but not necessarily a “buy” if you don’t.
I tend to agree about Niogold (haven’t studied up on Claude). I had a nice talk with Mike Iverson at the Vancouver show…great guy. They’re sitting on a fairly impressive hunk of gold, and I they’re well financed ($12M cash as of Oct 2011). This, along with their joint-spending on Marban tells me they won’t have to go to the markets for a while for extra capital. It’s listed on the Venture. That + junior explorer = less awareness. If gold goes to where many of us think it has to, the company will do very well.
Thanks Matthew. You always have interesting ideas and I appreciate you feedback, insights, and market analysis. I have see Aurizon investing in the Marban property as well but am not as familiar with Niogold. I do like purchasing shares of unrecognized and unloved companies with a big upside in a takeover situation. I’ll check it out.
Hi Matthew,
I always enjoy reading your insights and perspectives on markets and companies. I owned Niogold in ’09 and sold it in ’11 for a nice double. I’ve been watching it and have seriously considered picking it up again. Your observations are very valuable. Thank you. You ought to seriously consider starting your own business and doing an advisory letter service. Best to you.
Shad, castanheiro,
Thank you, I appreciate the kind words.
John W.,
I’m glad you brought up Niogold’s cash position. With Aurizon doing all the spending, Nio’s burn rate is very low. It’s so low in fact, that they would (theoretically) be funded for 27 years. If only more juniors were in such a position!
Matthew,,,,were do we send the check…..great info…appreciate all your advice.
Thanks Jerry. You can send the check to Paper Bugs Anonymous to help recovering paper addicts!
Morning Shad,
Many thanks for the insights.
Big Al
Thank Al. I appreciate your daily insights, your guests, and that you attract sharp people here in the blogs to bounce ideas off one another.
To your success!
Here’s a list of the biggest 50 companies that I track that mention gold AND silver resources on their web page.
A way f detecting acquitisition about to ocur is to look for what appears to be news-unrelated excess buying on level II. A little bit tedious. I included the lare companies so anyone that wated could go and look up how much cash on hand they had (again from their web page last financial statement.
A you can tell I live in the US, so US symbols not canadian.
Company Symbol Last Chg % Chg Open High Low Vol Mkt Cap
Gabriel Resources Ltd GBRRF 5.86 0.04 0.76% 5.97 5.97 5.86 0.00 2.23 b
FIRST MAJESTIC SILVER CORP AG 19.51 -0.38 -1.91% 19.99 20.07 19.45 400.00 2.06 b
Kirkland Lake Gold Inc KGILF 17.33 0.01 0.06% 17.28 17.33 17.20 0.00 1.21 b
International Minerals Corp. IMZLF 5.43 -0.23 -4.10% 5.43 5.43 5.43 0.00 648.44 m
Chesapeake Gold Corp CHPGF 9.61 -0.07 -0.76% 9.78 9.78 9.60 0.00 391.40 m
GREAT PANTHER SILVER LTD GPL 2.45 -0.03 -1.21% 2.51 2.51 2.42 0.00 336.65 m
Gold Canyon Res Inc GDCRF 2.58 0.13 5.27% 2.54 2.60 2.51 0.00 285.44 m
Wildcat Silver Corp. WLDVF 1.93 0.05 2.45% 1.88 1.93 1.88 0.00 254.72 m
Orezone Gold Corp ORZCF 2.68 0.02 0.64% 2.72 2.72 2.68 0.00 224.13 m
Ecu Silver Mining Inc. ECUXF 0.65 0.00 0.00% N/A N/A N/A 0.00 209.01 m
St Andrew Goldfields Ltd STADF 0.54 0.00 0.56% 0.58 0.58 0.53 0.00 198.12 m
Crocodile Gold Corp. CROCF 0.55 -0.01 -1.95% 0.56 0.56 0.55 0.00 171.85 m
Victoria Gold Corp VITFF 0.45 -0.01 -3.12% 0.45 0.46 0.45 0.00 152.53 m
Olympus Pacific Minerals Inc. OLYMF 0.36 0.00 0.00% N/A N/A N/A 0.00 137.98 m
Minco Silver Corp RTx MISVF 2.49 -0.01 -0.40% 2.50 2.50 2.42 0.00 132.53 m
Maudore Minerals Ltd MAOMF 4.92 0.00 0.00% N/A N/A N/A 0.00 131.16 m
Eastmain Res Inc EANRF 1.21 0.08 7.35% 1.21 1.23 1.21 0.00 118.37 m
Fortune Minerals Ltd FTMDF 0.95 0.00 0.00% N/A N/A N/A 0.00 110.75 m
Great Quest Metals Ltd GQMLF 2.25 0.00 0.00% N/A N/A N/A 0.00 97.39 m
Ascot Res Ltd ASOLF 1.29 0.07 5.35% 1.21 1.29 1.21 0.00 96.99 m
Rye Patch Gold Corp RPMGF 0.67 0.03 4.86% 0.65 0.68 0.65 0.00 92.47 m
New Pacific Metals Corp NUXFF 1.21 0.00 0.00% N/A N/A N/A 0.00 81.45 m
Gold Ore Resources Ltd GREXF 0.89 0.00 0.17% 0.91 0.91 0.89 0.00 75.92 m
Laramide Res Ltd LMRXF 0.91 0.01 1.34% 0.91 0.91 0.89 0.00 64.30 m
Columbus Gold Corp CBGDF 0.66 0.01 1.16% 0.66 0.66 0.65 0.00 60.42 m
Bellhaven Copper & Gold Inc BHVCF 0.50 -0.02 -3.17% 0.50 0.52 0.50 0.00 55.99 m
Malbex Res Inc. MXRSF 0.41 0.00 0.00% N/A N/A N/A 0.00 53.87 m
Moneta Porcupine Mines Inc MPUCF 0.33 0.00 0.00% N/A N/A N/A 0.00 51.75 m
Aberdeen International Inc AABVF 0.59 0.00 0.00% N/A N/A N/A 0.00 51.06 m
Yorbeau Resources Inc. YRBAF 0.26 0.00 0.00% N/A N/A N/A 0.00 45.34 m
Ressources Robex Inc RSRBF 0.25 0.00 0.00% N/A N/A N/A 0.00 42.65 m
Salazar Resources Ltd SRLZF 0.73 0.00 0.00% N/A N/A N/A 0.00 33.45 m
MDN Inc Common MDNNF 0.27 0.00 0.00% 0.27 0.27 0.27 0.00 27.78 m
Manitou Gold Inc MNTUF 0.52 0.00 0.00% N/A N/A N/A 0.00 24.90 m
Goldrush Resources Ltd GDRRF 0.18 0.00 0.00% N/A N/A N/A 0.00 24.71 m
Intl Pbx Ventures Ltd R IPBXF 0.19 0.00 0.00% N/A N/A N/A 0.00 23.22 m
Rockhaven Resources Ltd. RKHNF 0.43 0.02 5.91% 0.43 0.43 0.43 0.00 19.91 m
PC Gold Inc. PCGLF 0.30 -0.04 -12.22% 0.33 0.33 0.30 0.00 19.90 m
Golden Tag Res Ltd GTAGF 0.37 0.00 0.00% N/A N/A N/A 0.00 19.87 m
Channel Res Ltd New CHJRF 0.17 0.00 0.00% N/A N/A N/A 0.00 19.52 m
MacDonald Mines Exploration Ltd. New MCDMF 0.09 0.00 0.00% N/A N/A N/A 0.00 18.64 m
Eagle Plains Resources Ltd. EGPLF 0.22 0.00 0.00% N/A N/A N/A 0.00 18.56 m
Boss Power Corp BPUZF 0.25 0.00 0.00% N/A N/A N/A 0.00 18.14 m
Gold Reach Resources Ltd New GRJVF 0.72 0.00 0.00% N/A N/A N/A 0.00 16.85 m
US Gold Cdn Acquisition Corp Shares Exchangeable USGCF 5.27 0.00 0.00% N/A N/A N/A 0.00 16.76 m
GMV Minerals Inc. GMVMF 0.25 0.00 0.00% N/A N/A N/A 0.00 16.20 m
Odin Mining & Exploration Ltd ODMEF 0.19 0.00 0.00% N/A N/A N/A 0.00 15.85 m
Miranda Gold Corp. MRDDF 0.30 -0.05 -13.36% 0.35 0.35 0.30 0.00 15.83 m
Intl Northair Mines Ltd INNHF 0.22 0.00 0.00% N/A N/A N/A 0.00 15.04 m
Bison Gold Resources Inc. BGEZF 0.17 0.00 0.00% N/A N/A N/A 0.00 14.83 m
Hi cfs,
I second the motion re: Rye Patch and Eastmain.
Do not forget Orko Silver!
Big Al
Yes Al. Thanks for mentioning Orko Silver. The joint-venture work that Pan American Silver & Orko are doing on the La Preciosa project is picking up steam and I believe Orko got a bit oversold in 2011. I like that Pan American has de-risked the funding of that one for them.
Shad,
Thanks so much for the feedback.
All the best,
Marc
Right back at ya Marc. If we all keep sharing great ideas all boats will rise with the tide. Best to you.
Shad,
Thanks much. Great insight and commentary on these companies. Much appreciated!
Hi Marc,
Very good idea.
I will do that.
Big Al
Missivedutexas,
You recently asked for some references about the adoption of gold and silver.
Here’s one about the end of the use of gold and silver.
Source:
the Wit and Wisdon of Abraham Licoln by Alex Ayres, 1992 edition p. 140.
” In the midst of the Civil War, when the nation was relying mainly on metal money, there was a severe financial crisis. The President was unable to come up with enough coinage to pay the troops. Urged by some of his advisers to print paper money,Lincoln arranged a conference between them and Treasury Secretary Salmon P. Chase, who angrily asserted that it would be unconstitutional to print paper money.
The next day, President Lincoln sent his aides back to the Treasury Department with this note for Chase: You take care of the Treasury and I will take care of the Constitution.” ”
(Green backs have been with us ever since.)
That, my friend, is a GREAT point!
Big Al
Did you really say that it is a bad idea to spend your money on guns, food, gas, ammo, etc? I’m not saniyg it’s the only way to go, but you should probably have a little of everything. If SHTF you might want a gun with bullets around along with some food while you’re making it to a safe location.
CFS, love to read Civil War history and Lincoln. I`ll have to get the book.
I mentioned Wit and Wisdom as a source…..It is not that good a book, just a collection of Lincoln’s speeches. And not totally complete at that.
the reason for the lack of small coinage , was they were hoarding the small coins.
\and the military was using all the copper for bullit…….
if your would like to know more about the replacement of coinage, check out the
“stamp money” they were using inlieu of copper . The stamps were incased and had
different demonination 1cent 2 cent 3 cent 5,10,25,50…..they also, had “fractional
currency” to replace the coinage….these were also, small denominations….for everyday
use…..part of our history…..
Thank you CFS,
Great bit of history. Enjoyed it. Gives some additional perspective.
Here is a list o silver miners with a market cap above $100 million:
Company Symbol Last Chg % Chg Open High Low Vol Mkt Cap
Silver Wheaton SLW 36.00 -0.20 -0.55% 36.54 36.54 35.72 3.00 m 12.73 b
Pan American Silver Corp. PAAS 23.96 -0.05 -0.21% 24.00 24.39 23.84 1.35 m 2.50 b
Coeur dAlene Mines Corp. CDE 27.86 -0.22 -0.78% 28.27 28.40 27.80 962.32 k 2.50 b
Hecla Mining Co. HL 5.02 -0.07 -1.38% 5.18 5.21 5.02 4.56 m 1.40 b
Silver Standard Resources Inc SSRI 16.01 -0.35 -2.14% 16.50 16.57 15.98 598.34 k 1.29 b
Endeavour Silver EXK 10.18 -0.11 -1.07% 10.39 10.39 10.15 658.32 k 889.52 m
Fortuna Silver Mines Inc. FSM 6.71 0.08 1.21% 6.63 6.73 6.53 84.20 k 838.44 m
MAG Silver Corp. MVG 9.25 0.50 5.71% 8.77 9.33 8.77 102.04 k 514.92 m
SilverCrest Mines Inc. STVZF 2.55 -0.01 -0.53% 2.58 2.58 2.51 13.80 k 221.89 m
Orko Silver Corp OKOFF 1.62 -0.03 -1.82% 1.65 1.65 1.60 25.69 k 210.31 m
Silver Wheaton Corp Warrants SLWBF 27.69 0.00 0.00% N/A N/A N/A 0.00 128.71 m
Impact Silver Corp ISVLF 1.72 -0.03 -1.71% 1.76 1.78 1.72 6.90 k 117.01 m
Arian Silver Corp. ASLRF 0.35 0.01 4.36% 0.35 0.35 0.35 1,000.00 104.69 m
Silvermex Resources Inc. GGCRF 0.43 0.01 1.24% 0.43 0.44 0.43 132.60 k 103.25 m
Silver wheaton buys silver streams, not companies, and there really is not another company big enough to swallow $890 million of Endeavour, so I would rule that as imprrobable as an acquisition.
Mergers are less likely because of egos in this business, but might happen if there was good synergy. i.e. if there was proximity of mines or processing facilities. etc.
Here there is a problem. Endeavour is in Mexico and Chile. If you do a check of the various cmpanies of similar size, I don’t think there is much of similarity giving synergy.
But I have not done a thorough check of each company website.
Similar analysis could be done for GPL, and here I would expect more likelihood of finding something.
Another approach would simply be to call up the companies and ask. You won’t get a direct answer, but mat be able to read between the lines. If you get a secretary type, start chatting and then ask if there have been any vistors from other mining companies, etc.
Final comment is there is a good opportunity for companies to get together this weekend, because Don Coxe is chairing his annual conference (invitation only) down in Florida. All the up and coming companies will be there. Even people like Robert Friedland will come over from Mongolia, etc. Hope this info is useful.
CFS,
You my friend, are simply awesome!!
All the best,
Marc
Like many others in this blog, I hope our paths cross in person – viva LA INTERNET.
Very insightful analysis CFS. I agree that the prospect of Silver Wheaton buying Endeavour is unlikely, however the prospect of Endeavor buying Great Panther Silver is more of a possibility.
I wish the silver miners all the success as their share prices (while rising recently in a good way) are still far undervalued and oversold from the second half of 2011. These stocks are also undervalued based on the margins they are making at silver in the $30-$35 range. Most of their production costs are $4-8 an ounce so they are making a fortune and the markets have not properly evaluated their potential to grow at a faster rate than even most gold miners.
Of course it is useful cfs.
Many thanks,
Big Al
nice work, C
i agree with dusty I suggest you get in ccntaot with real estate agents down in N.C and get started. I commend that you consider your doggies I know that I would not move anywhere that will not allow me to take my Boxers good luck with your search..
Excellent comments…While I have a few Juniors/explorers, I guess that I’d rather rely on the big gold boys to cherry pick the best minors and/or or juniors as they have the money in the bank(billions), excellent staffs, good management, little or no debt and are more likely to sort out the wheat(5-30) from the chaff (about a 1000)when it comes to M&A’s to further build up their reserves. Current favorites are ABX, GG and Newmont. Most have good silver plays as well e.g. GG with 31 million ounces a year(compared to CDE with 20-21 million ounces a year) and only 25% of it hedged. Just my humble opinion
Thanks Dai. Sounds like a solid strategy.
Marc
Apologies for all my typos. I type faster than my computer can handle on a dial connection……frustrating I did not check and correct.
CFS,
No worries…thanks so much
Marc
Dai,
I agree with your strategy, especially as the “big boys” are increasing their dividend payouts. (we might be able to recieve an income stream afterall)
Bobby,
I agree….dividends are now becoming a factor in all of this….along with, of course, getting multiple baggers. Now, the game gets more interesting, prioritizing your investment strategies and approaches.
All the best,
Marc
BTW, thanks for all your input!
THANKS TO EVERONE ABOVE FOR DOING ALL THE HARD WORK IN KEEP ALL INFORMED
RESPECTFULLY OOTB…..
typo….sorry…early morning….everyone….keeping…
Hi Jerry,
I couldn’t agree with you more!! DITTO!!
This organization is very uzoiganrned. I can not believe that there is a tournament Monday night and at 6:30 Saturday night we still have no clue as to when and where we are playing.
As I posted a few days ago, my TA work was indicating that platinum and silver should out-perform gold in the short-term, so I thought I’d do a search on David Morgan to see what he was up to recently. This interview showed up connected with Pt, so I thought I’d give the url. Do not think is is investment advice, but rather another source of news and Jay Tayor also posts on this website occasionally.
http://www.investmentpitch.com/media/1172/Prophecy_Coal_Corp._TSXV:_PCY_David_Morgan_interview/
Platinum has already made a big move…against gold…. check out the ratios…between
Dec 2011 and to date….it is historically still under valued compared to gold….
I suggested in Nov. early Dec…the charts looked like 08….and this was correct..,(check with matthew on this one.)
I agree that it still is undervalued compared to gold…but, platinum is not for everyone
and takes on the demand and supply of the auto industry. But, long run it will be
more valueable than gold…..
Hi Marc,
I just re-read the great article you gave me in the desert.
If possible could you source it and somehow copy it to this forum. It is a great example (or should I say examples) of predatory capitalism and give some interesting insight into human nature.
Thanks,
Big Al
Big Al,
I will try to track it down. I am glad you mentioned it. I thought I slipped it into the card, but wasn’t sure. Al Lewis, is a very clever guy. I thought the article really nailed home points you and this forum have pointed out so eloquently. The SD Union/ Tribune runs a small portion of the WS Journal in its paper every Sunday. Hence, I was able to read it and get it to you. So, I will try to get to it and do what I can. I am not anywhere close to computer literate as most of the bloggers here but I will try. Or maybe I can have it printed in the blog. What was the name again? My Captain..Oh, Captain…please repeat the title of the article again. Thanks.
Marc
Hi Marc,
The name of the article is “O Captain! My Captain!
I thought that it was really great. Thanks again,
Big Al
As far as possible M&A’s go and takeover candidates, I’ve been tracking 2 developing companies in a mining friendly area of Canada for the past year. These companies adjoin each other on the same strike. Both have a large number of most impressive AU and AG drill results and they are in a good mining infrastructure area with electricity, roads, labor and water.
Both have current ratios over 7 (no debt) and have money in the bank and strong backing. Both are well below their 52 week highs.
This is not investment advice as I am not registered and because I generally buy high and sell low………..
However, I will continue to track Rainy River Resources (RRFFF) and Bayfield Ventures Corp(BYBBF)….For what it may be worth……………
John Kaiser has discussed Rainy River at a conference recently. At that comference when he discussed RR.V he also mentioned Camplats, Moss Lake, Pilot, Rye Patch andHighway 50, according to my notes.
Hi Gentlemen,
Listen to my Daily tomorrow re: Rye Patch!
Also, take a look at Clifton Star Resources. The company should be back trading this Friday or Monday.
Best,
Big Al
Big Al,
I am very interested in the M and A action that seems to be in the offing, I think as a GROUP we could all help each other by keeping each other in the LOOP. Politics DOES effect and have a place in investing, BUT my preference is to keep PM’s and resource stocks in the primary postion of debate and conjecture. With that said, I have heard that there are rumblings about Endeavour and Great Panther heading POSSIBLY to some M and A action. If anybody can challenge or support that statement that would be great.
All the best,
Marc