Smallcappower: SmallCapPower’s “Ask the Expert.” SmallCapPower was a Gold Plus sponsor at the recent PDAC Convention held in Toronto. We thought this would be a great time to ask our roster of experts, “What company do you think would be the next resource takeover target?”
John Kaiser: Well, let me back up a bit, in the last ten years there have been $140 billion worth of takeover bids involving 263 companies. That was phenomenal, there was incredible recycling. But we are at the end of the takeover cycle, many companies are down 80, 90%, the majors have taken out the best ones earlier. Now you’re seeing takeovers of clean up type takeovers where you’re getting maybe 100%, sometimes 200% premiums but off rock bottom prices that are of little consolation to the market, to the investors, we are not seeing recycling. One recent exception was Probe Mines, which was one of my recommendations; it has been taken out at an all time high price, 500 million bucks injected in to a system. Goldcorp Inc. (TSX: G) I think made a brilliant move, they’re acquiring existing ounces and they’re acquiring extraordinary potential.
It’s actually quite frustrating that this company was taken out because it could have become a double digit darling in the market that re-inspires face that juniors can find really, really big stuff. But as of these kind that are more clean up, a good example is Midas Gold Corp. (TSX: MAX), which went public in the $4 to $5 range, has managed to raise and spend over $100 million advancing what they now call the Stibnite Project in Idaho, and it’s trading at a pitiful price of $0.50 because it doesn’t quite work at $1,200 gold based on their updated prefeasibility study. They can change that by doing additional work, but it has incredible optionality on the upside for gold. Gold goes 1,400, 1,500, this company absolutely sinks, and the knock on the company is that it’s in Idaho, it will never get permitted, but in fact, it is a reclamation project with a gold mine attached to it, and I think people are going to be surprised that there will not be this relentless opposition to a project which is gonna clean up an area that the United States messed up in the ’40s when they needed tungsten and an antimony for World War II.
And this project, by the way, has antimony, has a byproduct credit, and antimony supplied 85% by China. Again, this is an example of a security of supply type of story. This company already has Franco Nevada (TSX: FNV) as a royalty holder, Teck Resources (TSX: TCK.B) as a minority shareholder, this company has the greatest likelihood of being absorbed amongst the advanced juniors.
Brent Cook: That’s a tough one. I man right now the focus is on Canadian or really assets in safe jurisdictions. One that I’ve been looking at that I haven’t actually bought yet, I still need to do a bit more research is a company called “Gold Road” (ASX: GOR) in Australia. They’ve made a major discovery in West Australia, it’s a bit low grade but it’s big. They’ve got around 4 million ounces combined so that’s what I’m looking at and I’m looking at things like that. Premier Gold (TSX: PG) had some good projects but there’s nothing that really stands out to me, because it’s really company specific, the company needs a patch of ground like you saw with Probe and Kayden. Those things were hard for me to predict because I didn’t know the thinking behind Goldcorp or Agnico.
Adrian Day: In our business, we don’t really look at specific takeover possibilities, let’s put it this way, a lot of companies are doing very, very good work and as we know the big companies need to be acquiring ounces, so companies like Kaminak, companies like Riverside, companies like Revelo, they’re all doing good work and have the ability of not to be taken over to sell one of their projects.
Jay Taylor: You know I haven’t given a lot of thought to it before our discussion here today but I know that one I like a lot is a company called Aurion Resources Ltd. (TSXV: AU). I like them because of the management. The management just recently took Kayden resources from . . . I think they got five or six times their investment in two years. When they started developing a gold silver deposit in Mexico and then sold it off to Agnico Eagle Mines Ltd. (TSX: AEM), now this same management team has jumped over to Aurion, they financed the company very effectively because of their good reputation and now they’re in the process of building another deposit in the Nunavut I think has actually an exploration potential.
I mean the management looked at several hundred prospects before they were able to acquire this one, and they’re in the same neighborhood as Agnico Eagle again, and I know that these fellas had in mind developing this deposit to the point where they can monetize it and sell it off and I wouldn’t be surprised they’ll do the same thing again. I’m sure there are others out there that are closer to fruition but this is one that I have on my radar screen, it’s one that I have in my newsletter, Aurion Resources.
Vikas Ranjan: We like the chances of Timmins Gold Corp. (TSX: TMM) from that prospective. Timmins Gold is the actually one of the members of our Ubika Gold 20 Index, it’s a low cost producer in Mexico. They just did their own acquisition, a company called Newstrike. They are at the size where they could be attractive to midsize producers, as well as large producers, so keep an eye on that.
