The junior gold stocks we’ve discovered have developed into appealing acquisition candidates for bigger gold miners
SmallCapPower | May 1, 2020: The gold price is poised to have a strong year in 2020 given the record amount of monetary stimulus related to the COVID-19 pandemic. Bigger gold miners will need new sources of gold production as current supplies dwindle and, thus, will be best served buying an existing resource rather than trying to find more gold on their own. Today we have identified three junior gold stocks that have become appealing acquisition candidates.
*Returns are based on closing stock prices as of April 30, 2020
Wesdome Gold Mines Ltd. (TSX:WDO) – $10.66
Wesdome Gold Mines explores for, extracts, processes, reclaims, and sells gold in Canada. It produces principally gold in the form of doré bars, and silver as a by-product. WDO boasts over 30 years of continuous gold production and the Company’s principal assets include the Eagle River Mine, which consists of three contiguous mining leases and 442 contiguous active mining claims covering an area of 7,958 hectares; the Mishi Mine that consists of 19 patented mining claims, five mining leases, and five staked claims covering an area of 3,055 hectares; and the Eagle River Mill located near Wawa. During 2019, Wesdome Gold Mines saw a 28% increase in production along with a 9% decrease in cash costs over 2018. With most of its mining infrastructure already built, Wesdome can easily triple production without incurring significant additional capex costs, making the Company an attractive takeover target for a large-cap miner.
- One-Year Return: 152%
K92 Mining Inc. (TSXV:KNT) – $3.23
K92 Mining is focused on exploration and development of mineral deposits located in Papua New Guinea. The Company’s main asset is the Kainantu Gold Project, consisting of two gold deposits. The Kainantu property covers a total area of approximately 410 square kilometers and is located in the Eastern Highlands Province of Papua New Guinea. On March 27, 2020, KNT reported record 2019 revenue of US$101.7 million and a yearly profit of US$32.5 million, in addition to all in sustaining costs (AISC) of US$680 per gold ounce. Production for 2020 is expected to be in the range of 115,000 to 125,000 gold equivalent ounces at all in sustaining costs of less than US$700 per ounce. Given its high-grade gold results thus far, K92 Mining could end up being acquired by a large-cap producer (the property used to be owned by Barrick).
- One-Year Return: 128%
Probe Metals Inc. (TSXV:PRB) – $1.05
Probe Metals is a gold junior engaged in the acquisition, exploration, and development of gold properties in Canada. The Company’s flagship asset is the Val-d’Or East gold project, comprising approximately 820 claims covering an area of 33,429 hectares located in the city of Val-d’Or, Quebec. Probe Metals management has experience selling their assets to large-cap miners. Having sold the Borden Lake project to Goldcorp in 2015 for $526M, the likely exit strategy for this Company is a sale. On April 28, 2020, Probe Metals intersected 5.2 g/t gold over 14.0 metres at its Val-d’Or East Monique property.
- One-Year Return: 5%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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