Inflation concerns haven’t delivered the gains gold investors had hoped for in the SPDR Gold Trust (NYSE: GLD) over the past year. However, Bank of America analyst Michael Jalonen said Tuesday the wave of M&A activity in the gold space has carried over into 2021, and he expects even more deals in coming months.
Gold M&A Market Heating Up: In the first quarter of 2021, there were 15 global gold M&A deals, the most in a single quarter in nine years. In the past two quarters, there have been more than $10 billion in total gold transaction values, and Jalonen said the majority of them have been bolt-on and regional acquisitions.
Jalonen doesn’t expect any blockbuster mega-mergers among senior gold producers. In fact, senior producers have been selling off non-core assets to smaller producers in recent years, which Jalonen said has increased the number of “senior mid-tier” companies with annual output of between 1 million and 2 million ounces.
Jalonen said exploration typically replaces more than 60% of mined reserves annually for global gold producers.
“Based on the 7Moz of reserves acquired in Q1’21, another +15Moz of reserves needs to be acquired for the balance of 2021,” he wrote in a note.
Jalonen said junior producers and development companies are likely the most attractive targets for large gold producers. In addition, he said companies that have stretched balance sheets and limited free cash flow could make valuable acquisitions as well.
Potential Buyout Targets: Here are 10 of Bank of America’s top potential buyout targets for 2021 among junior and intermediate gold producers:
- Pretium Resources Inc (NYSE: PVG)
- Victoria Gold Corp (OTC: VITFF)
- Torex Gold Resources Inc (OTC: TORXF)
- Wesdome Gold Mines Ltd (OTC: WDOFF)
- New Gold Inc (NYSE: NGD)
- Lundin Gold Inc (OTC: FTMNF)
- Gold Road Resources Ltd (OTC: ELKMF)
- Perseus Mining Limited (OTC: PNMXF)
- MAG Silver Corp (NYSE: MAG)
- Pure Gold Mining Inc (OTC: LRTNF)
Benzinga’s Take: Gold miners, particularly the type of junior and intermediate miners included among Bank of America’s top potential buyout targets, have historically been very high-risk investments. A buyout deal would certainly generate huge overnight returns for any of these stocks, but investors should remember buying a stock in hopes of a potential buyout is an extremely speculative play.
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