M&A Heats Up In The Gold Mining Sector: Top News For January
Zijin completes acquisition of Nevsun.
The new Barrick Gold starts trading as GOLD. What comes next?
Newmont and Goldcorp to combine forces. Is it a good move?
Here's a look at that news and more top news in the gold sector for January 2019.
Top Gold Mining News for January 2019
I am here to provide you with the top news in the gold mining sector for January 2019.
Well, things are looking pretty good for gold here. The price is now above $1,300/oz, with a recent "golden cross" occurring. Sentiment in gold is strong as China trade woes and concerns of slower growth have helped boost demand.
(Gold 1-year chart. Credit: StockCharts)
Just a few months ago, I posted top news for November 2018. I stated the following:
Sentiment in the sector is currently so low, that I have to believe that right now is the buying opportunity of the year. After all, you're supposed to buy gold stocks when there is blood in the streets, and not when things are going well.
How fast things have changed! That appears to be the right call, at least for the time being. Gold has popped by $100, while the gold miners (GDX) have outperformed. While the rally may continue in the short-term, it may be a decent time to lock-in some profits if you have any.
[In case you missed it, here are my top gold stocks for 2019 and top silver stocks for 2019; a full list of picks and stocks to avoid are available to subscribers of my marketplace service.]
Here's a look at the top news in the gold mining sector this past month; it has been a pretty active month in what should be a great comeback year for gold.
10. Continental Gold Updates Resources at Buritica Project
Data by YCharts
Columbian-based Continental Gold (OTCQX:CGOOF) appears to be making exploration progress at its Buritica mine.
Measured and indicated mineral resources rose by 19% to 5.58 million gold equivalent ounces (at 10.54 g/t gold and 41.8 g/t silver); inferred mineral resources rose 30% to 6.24 million gold equivalent ounces (at 8.87 g/t gold and 39.3 g/t silver).
Underground development is 55% complete and construction is scheduled to be finished in the first half of next year, according to the company.
9. Harte Gold Declares Commercial Production at Sugar Zone Mine
Data by YCharts
Ontario-based Harte Gold (OTCPK:HRTFF) achieved commercial production at its Sugar Zone mine on January 8th.
The mine is operating at 575 tonnes per day, which is the current maximum level, but the company is aiming to increase throughput to 800 TPD. Production will likely only reach 33,000 gold ounces this year but could expand to 75,000 ounces or more by next year, with all-in sustaining costs set to decrease to $658/oz.
A feasibility study and optimized life of mine plan is targeted for release in the first quarter of 2019.
8. Sandstorm Gold Buys Royalty on Fruta del Norte
Data by YCharts
Sandstorm Gold (SAND) made its first big acquisition in 2019 when it announced it had purchased a .90% NSR royalty on Lundin's Fruta del Norte gold mine in Ecuador, for a price of $32.75 million.
Lundin recently reached the orebody at the deposit. I think this is a strong acquisition for Sandstorm, as I explained in recent coverage.
To me this looks like a lower-to-medium risk type of deal for Sandstorm, and the deal carries solid returns at current gold prices.
7. New Pacific Metals Strikes High-Grades at Silver Sand
Data by YCharts
Shares of New Pacific Metals (OTCQX:NUPMF) recently spiked on reports of new drilling results at its Silver Sand project in Bolivia.
Drilling commenced last year and 55,010 meters of drilling were completed by the end of the year; 94 of 98 holes hit silver mineralization. Drill grades ranged from 41 g/t silver to as high as 2,530 g/t silver. Most of the drills also hit lead and zinc by-products.
New Pacific was listed as my fourth overall silver stock pick in 2018 and an honorable mention pick on this year's list.
This is also great news for Silvercorp Metals (SVM), which owns a 30% equity stake in New Pacific Metals, and SSR Mining (SSRM), which also owns a sizeable stake.
6. Barrick Gold and Randgold Begin Trading as GOLD; Kibali Breaks Records
Data by YCharts
This is the first month of the newly-formed Barrick Gold (GOLD) followed the merger of Barrick and Randgold Resources.
It has been going pretty well for the $22-billion gold miner. On Jan. 28, the company announced that its Kibali gold mine in Congo achieved 807,251 ounces of gold production in 2018, 35% higher than the previous year.
The company's Tongon mine in Cote d'Ivoire also achieved its revised production target of 230,000 ounces; production was revised downward due to illegal strikes and social unrest.
The new Barrick is still looking to sell various non-core assets - 13 mines from South America to Zambia - and focus on its five "top 10 tier one" gold assets.
5. Struggles Continue at Guyana Goldfields; Shareholders Aim to Replace Entire Board
Data by YCharts
Guyana Goldfields (OTCPK:GUYFF) had a real tough 2018 and that may continue into the New Year.
Last year, it revised its guidance downward following lackluster results, due to lower grades and grade variability that was "not captured" in its geological modeling; later on, a director resigned and its CFO took a medical leave of absence.
More recently, a group of concerned shareholders launched a website "GixGUYGold.com" aimed at replacing the current board: "Guyana Goldfields has lost over CDN$1 billion in value since 2016 because of the incumbent Board's operational failures, irresponsible actions and questionable decisions."
4. Zijin Completes Acquisition of Nevsun
Data by YCharts
The Chinese-based Zijin Mining (OTCPK:ZIJMF) has officially completed its acquisition of Nevsun Resources and the Timok project in Serbia.
Zijin paid C$6.00 per share to acquire Nevsun in a deal worth $1.41 billion in an offer that was 26% more than the previous takeover bid from Lundin Mining; Zijin previously announced plans to raise $1.16 billion to fund the takeover.
Congrats to previous Nevsun shareholders. I look forward to seeing this project advanced by Zijin.
3. Kirkland Lake Reports Record Annual Production
Data by YCharts
Kirkland Lake Gold (KL) impressed the market yet again when it announced record annual gold production of 723,477 ounces for 2018, a 21% year-over-year increase.
The company's financial position has strengthened greatly, with its cash position up 29% in Q4 to $332 million. Shareholders are being rewarded with a $.04 per share dividend, plus a 85% stock price increase for 2018.
The company's three-year production guidance calls for a slight uptick in 2019 (740,000 - 800,000 ounces), followed by growth to 850,000 - 910,000 ounces in 2020 and 945,000 - 1,005,000 ounces in 2021.
Kirkland Lake's stock price rise has been nothing short of extraordinary. One has to wonder if Kirkland Lake will be bought out at this point or look to made an acquisition. On a side note, check out CEO Tony Makuch's recent interview on CNBC with Jim Cramer.
2. Iamgold Puts Cote on the Back Burner
Data by YCharts
Iamgold (IAG) has decided to (wisely) defer construction on its Cote Gold Project in Canada, which is a joint-venture with a Japanese company called Sumitomo Mining.
While the massive gold mine carries decent economics, with an after-tax value just shy of $1 billion and all-in costs at $703/oz, it also requires $1.1 billion in initial capital (of which $710 million Iamgold would be responsible for). The company is waiting for improved market conditions (higher gold prices) to proceed with construction.
With total liquidity north of $1.2 billion and $785 million in cash and cash equivalents (following the forward gold sale agreement), Iamgold has plenty of capital to grow from its current asset base and perhaps make an acquisition or two. It's the right move by the company in my opinion.
1. Newmont and Goldcorp to Form Mega-Miner
Data by YCharts
The Barrick and Randgold merger was one for the ages. But just weeks later, Newmont (NEM) announced it will buy Goldcorp (GG) in an all-stock transaction valued at $10 billion, creating the world's largest gold mining company, which will be valued at more than $30 billion and produce 7.8 million ounces of gold per year.
The company expects up to $100 million in annual synergies (pre-tax) and will also look to shed $1 - $1.5 billion through mine sales over the next two years.
Newmont shares are down slightly since the deal was announced. Like many other analysts and gold mining observers, I'm not a fan of this deal as I don't see how bigger means better for Newmont shareholders. However, I do think it will lead to further M&A in the sector, which will be good for miners as a whole.
Which gold mining company will get taken over or merge next? I've released a list of what I feel are some top takeover targets. I definitely don't think we've seen the last deal of 2019.
Did I miss any top news this month? Let me know in the comments.
Disclosure: I am/we are long KL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
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