Sean Mason | October 23, 2015 | SmallCapPower
A tarnishing gold price has hurt the stock prices of most junior gold companies, but the sector is still teeming with activity. This environment has forced many smaller firms to merge and prompted larger ones to acquire quality projects at a discount. Ontario has become a preferred jurisdiction, as it is politically stable with good infrastructure. That being said, we have identified five gold juniors with properties in Ontario that top our list of attractive acquisition candidates.
Treasury Metals Inc. (TSX: TML):
It’s been said that “grade is king” and this company definitely has the goods. Treasury owns the Goliath Gold Project located near the city of Dryden in northwestern Ontario, and a recent resource update shows an estimated 1.2 million Measured and Indicated (M&I) gold equivalent ounces at nearly two grams per tonne (open-pit grade of 2.8 g/t), a 44% increase from the 2011 Resource Estimate. It also contains more than 340,000 gold equivalent Inferred ounces. Infrastructure makes this project appealing as well, as the property has road access, existing power lines, and the nearby city of Dryden (about halfway between Thunder Bay and Winnipeg) has a Canadian Pacific Rail terminal. The project’s initial CAPEX is estimated at just C$93 million. With a market cap of about $40 million, Treasury Metals has one of a few deposits in Canada advanced in the mine permit and engineering stages. Goliath’s proximity to Rainy River and Red Lake could pique the interest of both New Gold Inc. (TSX: NGD) as well as Goldcorp (TSX: G).
Detour Gold Corp. (TSX: DGC): An expensive acquisition target with a market cap of about $2.6 billion, but what its single-producing mine lacks in grade (less than one gram per tonne), it makes up for in volume (15 million ounce reserve). Detour Gold has been working hard to bring its production expenditures down, with its Q2 2015 all-in sustaining costs coming in at US$1,030 per ounce sold. The company expects its output to be approximately 500,000 ounces in 2015.
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Lake Shore Gold Corp. (TSX: LSG): Lake Shore’s two producing mines in northern Ontario along with a market cap of about $500 million makes this junior gold miner an appealing takeover target. The company has a current cash balance of $81.4 million and it expects to produce more than 180,000 ounces of gold in 2015 at all-in sustaining costs of less than US$950 an ounce. Its resource and reserves total nearly 3 million ounces. Further upside to this company should come from its third gold complex, the Fenn-Gib project, as well as its recently-completed acquisition of Temex Resources.
Kirkland Lake Gold Inc. (TSX: KGI): Much Kirkland Lake’s share price performance of late can likely be attributed to one man: Eric Sprott. On January 26, 2015, Kirkland Lake Gold announced the appointment of the founder of Sprott Asset Management as the company’s next Chairman. At the time of the release. Mr. Sprott held 11.3% of Kirkland Lake Gold’s issued and outstanding common stock. Kirkland Lake Gold owns the Macassa Mine and Mill and four contiguous formerly producing gold mining properties in northern Ontario. Macassa has one the highest reserve grades of any gold mine in the world at 17.1 grams per tonne (g/t). Year to date (YTD) 2015, the company’s all-in cash cost per ounce slid to US$1,153, which allowed it to generate net income of $4.2 million for the third-quarter and $11.9 million YTD. Kirkland Lake Gold also recently increased its production guidance for fiscal 2015 from 140,000- 155,000 ounces to 153,000-157,000.
Richmont Mines Inc. (TSX: RIC): Richmont has an operating mine in Quebec and one in northern Ontario. The company announced recently that it expects to achieve the higher end of the increased annual production guidance of between 87,000 and 95,000 ounces.
Upside for this company could come from developing the deep, high-grade zone at its Island gold mine, estimated at about 9.5 g/t. Richmont Mines has a current market cap of about $235 million.
Disclosure: Treasury Metals Inc. is a client company of SmallCapPower and has paid a fee for coverage. For more information please visit the Company’s Investor Hub here >>
