The overall environment for gold, gold stocks, and financings continues to be strong
Dave Erfle joins me for a look at the precious metals sector. A bit of a selloff halfway through the day for gold, silver and the underlying stocks. Overall the sector continues to show strength and money is flowing into companies with some major bought deals. We also discuss an area play that Dave is focused on this upcoming season.
Click here to visit Dave’s site and learn more about his newsletter – The Junior Miner Junky.
Almost forgot: swapped Brixton for some more Santacruz. Now it is up to those two to decide if I swap back.
I topped off on Santacruz today. Volume looks good
Yep, I’m looking to see Santacruz (SCZ) wake up from it’s Silver slumber as the smallest market cap Ag Producer, and with 3 operating mines and with them getting closer to parity, if Silver keeps running higher above $19 and moves towards $20-$21 later this year then SCZ can really move.
That is why last year in 2019, Santacruz smoked all the other producers and developers.
Ever Upward!
Here is Morrs Hubbart’s SCZ chart from last month where he showed Santacruz may be ready to run again, coming off a large inverted head & shoulders pattern, and it looks like he may be spot on about that, as SCZ has just started to move this week.
https://s3-us-west-2.amazonaws.com/cdn.ceo.ca/1fab1hd-SCZ%20Santacruz%20Silver%20Chart.JPG
I posted this chart last year when Gold took off in May.
This was the first 3 months of the new bull impulse leg from May – August and so many sat around scratching their heads at SCZ’s outperformance but it made all the sense in the world for the smallest market cap Silver Producer with higher cost and lower liquidity than most companies to have the most upside torque when prices were surging back above $19 again. Yes, most Silver companies moved higher when that started, but it is often the #BestOfTheWorst that have the most leverage when the worm turns.
http://cdn.ceo.ca/1ekshtl-JR%20Silver%20Producers%203%20Month%20Returns.JPG
Correction, I meant when Silver took off, but obviously it took off along side Gold in May 2019.
(PRU) (PRU.AX) Perseus Mining To Acquire 100% of Exore Resources (ERX.AX)
#IvoryCoast #WestAfrica #TakeOver #Acquisition
– all-share transaction
– premium of 69% to Exore closing price on June 2nd
– premium of 78% to 20 trading day VWAP
– 56.9% premium based on 20 trading day VWAP of both companies
https://www.asx.com.au/asxpdf/20200603/pdf/44jbmngbpz2yw8.pdf
We keep hearing pundits say (eroneously) that there hasn’t been much M&A in the PM sector, but there are more transactions like this every week
I think what many of those pundits mean is that there hasn’t been M&A in some of the popular cult stocks that everyone has been banging the table on the last 2 years. 😉
Once again, it is often the overlooked struggling companies, or 1 asset companies, or companies that just completed a turnaround (or are in need of a drastic turnaround) that get nabbed, not always the bright shiny object that everyone is fawning over.
Probably would be more M&A if “Sprott International Bank” hadn’t been buying into everything. I think he has kept a bunch of them alive to fight another day.
That is possible, but an acquiring company could also see that as a strength to their balance sheet and endorsement that a given Jr has the goods and may be worth that acquisition candle.
My point was more along the lines that we keep seeing more and more M&A deals going down for 40-70% premiums, and then we hear more and more pundits say there hasn’t been much M&A… (?)
I think if just a few of those hot cult stocks that are more widely followed were taken out at all times highs, those same pundits would swivel to, “Wow, look at all this M&A”. We’ve see the same thing the last few years, where there are plenty of takeovers (many I was involved with) on lessor followed companies, and they get swept under the rug mentally, but then if there is one higher profile takeover, then suddenly there are tons of editorials that come out of the woodwork discussing the ramping up of M&A.
The truth is that most M&A is done when a company is struggling, and that is the time to go bottom fishing in companies with great assets, but struggling to bad management, that would incentivize a larger company to put that team out of their misery and show them how it is done.
We just saw that last month with the producer dogs TMAC and Guyana Goldfields being acquired by 2 larger producers that actually have a clue how to run things efficiently. We also see it in languishing Developers getting no traction in the marektplace, like the Pershing Gold acquisition by Americas Gold & Silver last year, where USAS took an asset that was treading water for a decade, and got it developed and into production in 1 year and now they are producing Gold & Silver on that asset in the safe jurisdiction of Nevada.
There needs to be more consolidation of struggling production assets and stranded development stage assets by miners that know how execute, and so rather than looking for the very best Tier 1 assets all the time and piling on with the herd near bubble tops, more investors should be scouting for great projects that are being ignored by the market or just starting to turn their ship around to go bottom fishing before the next wave of M&A takes out another wave of mining dogs.
Just to expand/clarify one point, there will also be acquisitions of the very best in class as well, like what we saw with Newmonth/Goldcorp or Rangold/Barrick or with Kirkland Lake taking over Detour Gold, but there are far fewer of those than poaching the weak and wounded companies with good assets in their portfolios.
Yes, at one point Silvercrest, Wallbridge, Great Bear, etc… will get acquired, but we’ll also see about 2 dozen dogs have their day, and they are valued much lower for investors to start getting positioned in front of that.
There are also a bunch of essentially 1-2 asset producers or developers that are well run and have done good, but not great, that could make great bolt-on acquisitions for a larger company wanting to grow their pipeline or diversify in juridiction, so I’ve been spending some time sprinkling in some of those over the last year into my portfolio.
Just to expand/clarify one point, there will also be acquisitions of the very best in class as well, like what we saw with Newmonth/Goldcorp or Rangold/Barrick or with Kirkland Lake taking over Detour Gold, but there are far fewer of those than poaching the weak and wounded companies with good assets in their portfolios.
Yes, at one point Silvercrest, Wallbridge, Great Bear, etc… will get acquired, but we’ll also see about 2 dozen dogs have their day, and they are valued much lower for investors to start getting positioned in front of that.
There are also a bunch of essentially 1-2 asset producers or developers that are well run and have done good, but not great, that could make great bolt-on acquisitions for a larger company wanting to grow their pipeline or diversify in juridiction, so I’ve been spending some time sprinkling in some of those over the last year into my portfolio.
It will be interesting to see what it will take, to take over a Silvercrest, Great Bear or Wallbridge as the longer each goes on with discovery, the more the resource grows as well as reinforcement of good grade. What intervention or creativity might be attempted if the price of gold or silver can’t be contained.
Well, if they keep running to much higher, then the acquiring companies will most likely do an all paper stock merger, versus cash, or a merger of equals without a premium, like what Equinox & Leagold did or what SSR Mining and Alacer just did.
to = too
Speaking of Great Bear and companies hitting the finance window, here is this news…
(GBR) (GTBDF) Great Bear Closes Previously Announced Bought Deal Private Placement Raising Gross Proceeds of C$33 million
by @newswire on 2 Jun 2020
https://ceo.ca/@newswire/great-bear-closes-previously-announced-bought-deal
(LIO) (LOMLF) Lion One Appoints David Tretbar to Board of Directors
@newsfile on 3 Jun 2020
“Mr. Tretbar is currently Vice President, Exploration and Mineral Resources of Denver-based Summit Mining International, a 100% owned subsidiary of Sumitomo Corporation of Japan, where he is responsible for developing exploration programs, implementing exploration and resource development strategies, and providing technical support in all aspects of mine and mill production at Minera San Cristóbal in Bolivia. He also performs project due diligence for strategic alliances and joint ventures, and executive support functions within Summit Mining and its parent Sumitomo Corporation.”
https://ceo.ca/@newsfile/lion-one-appoints-david-tretbar-to-board-of-directors
This is a very bullish endorsement if Sumitomo is putting their point person for strategic alliances on the board of LIO Lion One.
Lion One is likely sitting on a monster alkaline deposit and they know it, and want to be first in line if that is what starts happening as they drill deeper and wider in their now 100% owned 7 KM diameter land package inside that caldera.
I guess everyone is out protesting or something. Anyway, woke up this morning with the idea of making a few changes. Didn’t come close to what I had planned, but here are some new stuff based on some news announcements: picked up some Riverside Resources, Japan Gold (second time), Silver Grail And Teuton Resources (reading about Sprott again), Melkior from a last week release, and back to Endeavor Silver by selling some Silvercrest (pulling teeth to do that but had a good gain). Meant to reenter Sailfish, but maybe next time. The good news is that Endeavor had some great drill results and the price went down. Correction days are good for some things…maybe. Most interesting was Teuton Resources in the triangle. Evidently Sprott has an interest in Tudor, American Creek and Teuton sort of like the Wallbridge, Balmoral, Ely thing. There you go…info to contemplate while having a cup of coffee.