Upbeat in Denver – booming gold and silver prices give M&A targets big boost

Talk at this year’s Denver Gold Group event naturally revolves very much around what may be the next big acquisition target for the resource hungry major gold miners.
Author: Lawrence Williams
Posted: Monday , 20 Sep 2010

DENVER –

Today marks the opening of this year’s Denver Gold Group event where the great and the good of the gold (and silver) mining sector congregate to present to a high powered audience of investors, fund managers and analysts, and to intermingle with their peers. It is the premier conference of its type and attendance is restricted to those invited who have to satisfy certain criteria to present – or even to attend.

It is one of the few major investment conferences which are attended by virtually all the gold and silver mining majors as well as the mid-tier companies and those juniors which have reached sufficient market capitalisation to be invited. Naturally the potential for dealmaking at a conference of this type is strong and nearly all the CEOs of those companies showing particular promise have found themselves booked up in one-to-one meetings throughout the three days of the event.

With metal prices at or near record levels in the case of gold and just short of a 30-year high for silver, M&A talk is very much in the air and with recent deals including Goldcorp looking to pay a huge sum to take on Andean Resources, Newcrest’s take-over of Lihir and Kinross with Red Back, a few promising junior mine developers with good projects must be licking their lips in quiet anticipation.

The conference starts with the smaller operating miners and developers for the most part presenting on the first morning, building up through the mid tier miners up to the majors who are mostly scheduled to present on the final day of the conference. The true juniors (at least those which qualify) are confined to hosted cocktail events in the evenings after the day’s main presentations are over

And there are some very interesting stories to tell as companies jockey for position as being the next big thing – and with the pace of gold mining exploration and development running at a very high level at the moment, and some great successes being reported as companies battle to replace diminishing output as the older larger mining operations encounter fading resources.

What is apparent from the recent M&A activity, and the continuation of dehedging by hedged producers, is that for the most part the big gold mining CEOs are hugely confident in the continuing advance of the gold price and are taking what may appear to outsiders to be enormous risks in terms of prices being paid for gold in the ground. They have to be confident that the price will stay at least where it is – and continue its upward movement, and also that the companies being absorbed have great potential for expanding their announced resources. The decisions to pay these huge sums will not have been taken lightly.

So who are the likely take-over targets out there? Probably any junior which satisfies the criteria of controlling large gold resources – perhaps 10 million ounces or more – or are seen to have this kind of potential, and could produce profitably at a gold price at or around between $500 an ounce – and there are a number of these out there at the moment – but again perhaps the jurisdiction under which they operate probably needs to be relatively low risk too. Juniors in general do not necessarily have the resources, or management skills, to run major mining operations so for many, being acquired is the natural route however much they might like to become major miners in their own right.

With presentations split into parallel sessions at the Denver meeting it is impossible to cover everyone so anything reported on these pages represents a snapshot of events, but on the first morning perhaps one of the most interesting apparent gold mining success stories would have been Centamin Egypt which would satisfy many of the criteria of being a take-over target with current reserves of 9 million ounces and growing as new areas of potential around its Sukari mine in Egypt are being explored. However this is indeed a junior explorer which has already become a producer in its own right and maybe with Egypt being a bit of an unknown as far as its attitude to mining is concerned it may well be off the radar for bigger outfits. Even so, despite some plant teething problems the mine is looking to produce 160,000 to 170,000 gold ounces this year, growing to 300,000 ounces next year and with big plant expansion plans ahead should become a significant mid-tier producer in its own right in the years ahead.

With high flying juniors like Seabridge, Lake Shore, Detour, Osisko etc. due to present, and some junior explorers with demonstrated huge resources like Exeter with its massive Caspiche gold copper project and Greystar with its Angostura project, to mention but two, relegated to the explorers and emerging producers receptions in the evenings, there is plenty of scope for would-be acquirers – and then the mid-tier miners can also be targets for the bigger miners.

This promises to be perhaps the most interesting Denver Gold Group meeting for several years and, of course, it the gold and silver prices move sharply upwards during the event that would be the icing on the cake for the conference organisers. So far the prices have been pretty flat, but a lot can happen in three days!

September 22nd, 2010
Categories: Uncategorized . Author: admin