Introduction
This is the second part of a two part article on Gold mining acquisition. In the first part, we explored some ideas of Gold production and the replacement of reserve ounces that were mined. For the large capital gold stocks (referred to as “Big Gold”), the most viable route is the acquisition of Gold Juniors to replenish their gold ore reserves. In this concluding part, we will examine a Great Basin Gold as a prime candidate for acquisition.
Prime Acquisition Candidates
Following is a compiled list of Emerging Gold Producers circa 2007, from the Gold Stock Strategist website. These soon to be producers are the most viable and least risky candidates for Big Gold to acquire.
Emerging Gold Producers
1. Alexis Minerals Corp. (TSX:AMC; OTC:AMSMF)
2. Anatolia Minerals Development Ltd. (OTC:ALIAF)
3. Apollo Gold Corp. (TSX:ATG: AMEX:AGT)
4. Atna Resources Ltd. (TSX:ATN; OTC:ATNAF)
5. ATW Venture Corp. (TSX:ATW: OTC:ATWVF)
6. Aurelian Resources (TSX:ARU, OTC:AUREF)
7. Aurizon (TSX:ARZ; AMEX:AZK)
8. Axmin Inc. (TSX:AXM; OTC:AXMIF)
9. CGA Mining Ltd. (TSX:CGA; OTC:CGAFF)
10. Crystallex International Corp.(TSX:KRY; AMEX:KRY)
11. Dynasty Metals & Mining Inc. (TSX:DMM; OTC:DMMIF)
12. European Goldfields Ltd.(TSX:EGU)
13. European Minerals, Inc.(TSX:EPM; OTC:EPMCF)
14. Gabriel Resources Ltd. (TSX:GBU; OTC:GBRRF)
15. Jaguar Mining, Inc. (TSX:JAG; NYSE:JAG)
16. Gold Reserve Inc. (TSX:GRZ; AMEX:GRZ)
17. Gold-Ore Resources Ltd. (TSX:GOZ; OTC:GREXF)
18. Gold Resource Corp.(OTC: GORO)
19. Golden Queen Mining Comp. (TSX:GQM; OTC:GQMNF)
20. Great Basin Gold Ltd. (TSX:GBG; AMEX:GBN)
21. Hawthorne Gold (TSX:HGC; OTC:HWTHF)
22. International Minerals Corp. (TSX:IMZ; OTC:IMZLF)
23. Jinshan Gold Mines Inc. (TSX:JIN; OTC:JINFF)
24. Kinbauri Gold (TSX:KNB; OTC:KINBF)
25. Lake Shore Gold Corp. (TSX:LSG; OTC:LSGGF)
26. La Mancha Res. (TSX:LMA; OTC :LACHF)
27. Luna Gold (TSX:LGC : OTC:LGCU)
28. Metanor Res. Inc. (TSX:MTO; OTC:MEAOF)
29. Minco Gold (TSX:MMM: AMEX:MGH)
30. Minefinders Corp. Ltd. (TSX:MFL; AMEX:MFN)
31. Moto Goldmines Ltd. (TSX:MGL; OTC:MTOGF)
32. Nevsun Resources Ltd. (TSX:NSU; AMEX:NSU)
33. New Guinea Gold (TSX: NGG: OTC:NGUGF)
34. NovaGold Resources Inc. (TSX:NG; AMEX:NG)
35. Orezone Resources Inc. (TSX:OZN; AMEX:OZN)
36. Pacific Rim Mining Corp. (TSX:PMU; AMEX:PMU)
37. Petaquilla Minerals Ltd. (TSX:PTQ; OTC:PTQMF)
38. Rusoro Mining Ltd (TSX:RML; OTC:RMLFF)
39. San Gold Resources Corp. (TSX:SGR; OTC:SGRCF)
40. Starcore International (TSX:SAM: OTC:SHVLF))
41. Tara Gold (OTC:TRGD)
42. Timmins Gold Corp. (TSX:TMM; OTC:TMGOF)
43. Western Goldfields (TSX:WGI; AMEX:WGW)
Source: http://www.goldstockstrategist.com/search/label/Emerging%20Gold%20Producer%20List
In the two years since the list was compiled many names on this list have been acquired. Kinross has purchased Aurelian Resources in summer of 2008. Kinbauri Gold has been acquired by Orvana Minerals in August 2009. Anglogold Ashanti and Randgold fought off Redback Mining to takeover Moto Goldmines October 16, 2009. Lake Shore Gold and West Timmins Mining completed their business combination on November 6, 2009. The writer considers Great Basin Gold (GBG), #20 on this list as a star candidate that fits a typical takeover profile.
Recent Gold Acquisitions
Goldcorp acquires Canplats for $227Million USD
Goldcorp (GG) on November 16, 2009 announced their acquisition of Canplats Resources Corporation (CPQ, trading on the TSX Venture). Goldcorp will assume ownership of Canplats' Camino Rojo Project, located approximately 30 miles southeast of Goldcorp's existing Penasquito mine in Mexico. The deal valued at $227 USD Million will add 1.7 million ounces of reserves to Goldcorp’s resource base. The calculated value for this transaction is $133 USD per gold ounce of reserve for Canplat’s property.
Eldorado merger with Sino Gold valued at $1.8 Billion USD
Eldorado Gold (EGO) on August 2009 announced a friendly merger with Sino Gold that would create a $6.4 Billion dollar top mid tier gold miner. The deal values Sino Gold at $1.8 Billion USD. Sino Gold has their flagship Jinfeng mine and three smaller properties in China. This transaction is expected to close in December 2009. The value for this transaction is calculated to be $352 per gold ounce of reserve for Sino Gold’s mines.
Company Make Over
In another life the writer was consulting for a startup telecom technology company. There was much feverish work in the days prior to a team from Nortel coming to visit. Extra people such as I were brought in to round out the staffing. Empty crates were brought into the warehouse and stacked as if production was in high gear. Telecom test gear was brought in and setup in the labs so as to appear quite busy. Overall the company was given a quick makeover for the possible suitor. Eventually the telecom company was purchased by UT-Starcom.
Great Basin Gold as a Takeover Candidate
This writer completed a recent report on Great Basin Gold that is displayed on Seeking Alpha. Great Basin has two new mines that are just starting up production. Hollister in the Carlin Trend in Nevada is a high grade underground epithermal type deposit. Burnstone is a Kimberley Reef underground mine in the Witwatersrand Basin in South Africa. Great Basin shares a lot of similar attributes with Sino Gold, which was in the business combination with Eldorado Gold described earlier. A comparison of some key statistics are in the table following.
Great Basin Gold with Sino Gold Comparison
Table 2: Comparison of Great Basin Gold with Sino Gold. Note the similar production levels and Reserves and Resources.
Great Basin is very similar in size of operations to Sino Gold. The reserves and resources are similar sized and their projected production levels are closely matched.
Great Basin Gold (GBG) just completed an offering announced on November 1, 2009, $110 Million convertible debenture. As Ferdi Dippenaar, President and CEO, stated: “The sale of convertible debentures is the preferred option with fewer encumbrances on Great Basin Gold's balance sheet, no requirements to hedge gold production and, on a relative basis, comes at a lower cost of capital in a rising gold price environment.” Reading between the lines, this is code talk for cleaning financial house, in order to provide a neat and clean package for Big Gold’s consideration when they come calling.
Conclusion
The timing is right for Big Gold to bolster their depleting reserves. World markets are pushing the precious metal prices ever higher. Big Gold is flush with the high valuation of their stock prices. Their mined out reserves need to be replaced. Their own exploration will not be able to replenish the stock of minable ore bodies. The Big Gold companies are opening their Gold pouches and have their financial minions furiously calculating Gold Junior companies’ valuations. The bull market for precious metals has created a window of opportunity for astute investors. There are large and quick gains to be had, if you can find the right companies that are being targeted by Big Gold.
One company that is a target and favored by the writer is Great Basin Gold (GBG). Goldcorp established a benchmark of $133USD per Gold reserve ounce in their acquisition of Canplats. This was for Gold reserves on a property that only has a Preliminary Assessment completed for a possible open pit mine. Great Basin’s 5.3 Million ounces of reserves are in two ready to go mines that has infrastructure built with $334 Million in capital expenditures. Using the same valuation figure of $133 USD per reserve ounce times 5.3 Million reserve ounces gives $704 Million USD in value. Adding the $334 Million in mine infrastructure expenditures, the total becomes $1038 Million USD for the valuation of Great Basin. The current fully diluted shares outstanding is 437 million. Great Basin’s current stock price is $1.57 giving a market capitalization of $686 Million USD fully diluted. That means there is a possible 50% upside for Great Basin’s shares in this scenario.
For a second scenario, from Table 1, Great Basin is comparable with Sino Gold in valuation metrics. Should a business proposal appear, for valuation purposes, one may consider the $1.8 Billion valuation of Sino Gold as being applicable to Great Basin. If one considers the current debentures increasing the share float to 500 million, then the value per share would work out to be $3.60. Again there is a significant 100% + upside for Great Basin’s shares in this second scenario.
So Gold Junior, get your financial house in order, the “Gold Sugar Daddy” is coming!
Disclosure: The writer holds a long position in Great Basin Gold (GBG)
Marco G. November 22, 2009 http://goombarhsedge.blogspot.com/
Important Disclosure
The information and opinions contained within this document reflect the personal opinions and views of the author and should be view as information for thought and entertainment only. The author may from time to time have a position in any of the securities mentioned. Any material within should not be construed as accurate or reliable or be utilized as advice for investment or business purposes. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. There are no guarantees of the accuracy or completeness of the information contained herein. These writing are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not receive or request compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.
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