A recent Financial Post article quoted an RBC Capital Markets analyst, who expects Goldcorp Inc. (TSX: G) to make some strategic acquisitions in the months ahead. Indeed, Goldcorp has grown over the years to become one of the lowest-cost producers in the industry.
With a strong balance sheet and about $1 billion in cash, it makes sense for Goldcorp Inc. (TSX: G) to acquire some assets while the share prices of most of these miners are sitting at multi-year lows. That being said, the companies on our list appear to be a good fit for Goldcorp based on location and cost of production.
Alamos Gold Inc. (TSX: AGI): With a market cap of about $1.3 billion and approximately $130 million in the bank, Alamos would be a bit on the pricey side for Goldcorp but would be a great fit geographically as both companies have a majority of its production in Mexico and Canada. Alamos’ Turkey assets could be sold off to make the deal easier for Goldcorp to swallow. Alamos’ recent acquisition of AuRico Gold landed it the prized Young-Davidson mine in northern Ontario, which is expected to be a long-life, low-cost producing asset. Alamos’ all-in sustaining costs for its operations range from US$950?1,100 per ounce but potential synergies between the two companies could lower that amount.
Detour Gold Corp. (TSX: DGC): Another expensive acquisition target with a market cap of about $2.2 billion, but its single-producing mine is located in a politically-desirable jurisdiction (northern Ontario). What Detour’s project lacks in grade (less than one gram per tonne), it makesup 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.
Argonaut Gold Inc. (TSX: AR): Argonaut’s $200 million market cap and approximately $44 million in cash makes it a relatively inexpensive way for Goldcorp to add ounces. Argonaut has two producing precious metals mines and an advanced exploration property in Mexico in addition to a development-stage project in Ontario. The company produced approximately 136,000 gold-equivalent ounces in 2014 and its all-in sustaining costsfor the first half of 2015 were aboutUS$895 per gold ounce sold. Argonaut also has a resource of 11.5 million gold-equivalent ounces.
New Gold Inc. (TSX: NGD): The company has operations in Canada, the United States, Australia, and Mexico, consisting of four producing assets and three development projects with a market cap of about $1.4 billion. New Gold also has about $327 million in cash, not including the $90 million Goldcorp has agreed to pay the company for its 30% interest in the El Morro project in Chile. New Gold expects to produce approximately 400,000 ounce of gold in 2015 at all-in sustaining costs of US$745 to $785 per ounce and has 17.6 million ounces of gold reserves.
Lake Shore Gold Corp. (TSX: LSG): Lake Shore’s two producing mines in northern Ontario along with a market cap of less than $500 million makes this junior gold miner an appealing 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 pending acquisition of Temex Resources.
Timmins Gold Corp. (TSX: TMM): With a market cap of less than $100 million and $22 million in cash,Timmins Gold would be the cheapest alternative. It is also a good fit geographically with its operations in Mexico and is a low-cost producer. Timmins was already a profitable Mexico-focused gold miner before announcing the acquisition of Newstrike Capital in February 2015. Acquiring Newstrike’s Ana Paula project is expected increase Timmins Gold’s total Measured & Indicated gold resource by 75% along with a 34% jump in the gold grade. When all its projects are put into production, the company is expected to produce more than 300,000 ounces of gold annually at all-in-sustaining cash costs of less than US$780 per ounce.
