Gold Mining Takeovers and Consolidations Has Begun

Source:

Toronto's junior mining specialist Paradigm Capital says a difficult financing environment, and a widening performance spread between large and small cap gold stocks have made conditions for the acquirer the most attractive in years.

Toronto's junior mining specialist Paradigm Capital says a difficult financing environment, and a widening performance spread between large and small cap gold stocks have made conditions for the acquirer the most attractive in years.

...In their "Takeover 20" Update, Paradigm said sagging prices in the small cap gold sector, combined with a number of changes since February, "have made conditions ripe for another wave of takeovers and consolidation." These conditions include:

Senior and intermediate share prices have declined -11% and -12% respectively over the past six months, while emerging and exploration stocks have slid -24% and -25% respectively. Meanwhile, gold has decreased only two percent over the same period.

This puts larger cap stocks at an even greater advantage relative to smaller companies, in terms of using their valuation multiple advantage to acquire the smaller companies.

The ability of junior companies to finance development of their projects has also deteriorated, as a combined result of weaker equity markets and tightening credit conditions.

The market's appetite for risk continues to shrink, whether it is sovereign risk, technical risk, or financing risk.

A lack of new large discoveries tends to place a strategic focus on size...

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