Asanko Gold Inc.’s (TSX: AKG) proposed takeover of PMI Gold Corporation (TSX: PMV), which was announced on December 17, 2013, and approved recently by the shareholders of both companies, is yet another example of recent mergers and acquisitions activity that is expected to accelerate in the gold mining sector in the coming year.
While Goldcorp Inc.’s (TSX: G) $2.6-billion, or $5.95 per share, unsolicited takeover bid for Osisko Mining (TSX: OSK), announced on January 13, 2014, shows that the largest producers in the industry such as Barrick Gold Corp. (NYSE: ABX), Agnico Eagle Mines (NYSE: AEM), Kinross Gold Corp. (NYSE: KGC) and Newmont Mining (NYSE: NEM), are looking to replenish their gold reserves by trying to purchase the beaten-down shares of smaller gold miners, intermediate and junior gold companies, such as Asanko Gold, are also using the current weakness in gold sector to grow through acquisitions.
PMI Gold’s stock has surged more than 46% to its recent price of 41 cents since Asanko’s December 17th announcement and has been part of the Ubika Research Gold Mining 50 index since 2010 (see all the companies listed here).
A combined Asanko-PMI Gold will have approximately 7.5 million Measured & Indicated gold ounces in addition to 2.9 million Inferred ounces of gold, as well as $280 million cash in bank. This makes the new entity an attractive acquisition target in itself.
The mid-cap gold mining space has also seen M&A activity during the past year with companies such as Hecla Mining (NYSE: HL) beating out rival Alamos Gold (TSX: AGI) in its $796 million takeover of Quebec gold miner Aurizon Mines in early 2013.
Thus for many gold companies 2014 could be the year to “eat or be eaten,” that is acquire other companies or become another company’s acquisition.
For investors looking for other potential small cap and mid cap takeover candidates in the gold mining sector please see the recently-published article on SmallCapPower.com.
