VIDEO - Byron King: Gold M&A Activity is “Coming in a Big Way”
“The big companies with the big pricey shares and the large market caps … almost have to go out and start buying things,” said King.
Byron King, who writes Whiskey & Gunpowder at Agora Financial, said investors can expect more of the same moving forward. “I see it coming in a big way for a couple of reasons,” he commented.
The first is that institutional money is starting to flow into large gold miners, causing their share prices and market caps to increase quite substantially.
“The problem is that they need some assets to start to support those valuations. So they have to start to look for ways of bulking up just their internal ownership of gold in the ground or development projects, if not early stage mining projects,” King explained.
The second factor he pointed to is that major gold companies have in many cases reduced their exploration in recent years, essentially farming it out to Canadian juniors. Now, said King, the relationship between these two groups of companies is “about to really blossom.”
He added, “The big companies with the big pricey shares and the large market caps — those guys almost have to go out and start buying things.”
For investors, a key question is always which companies may be acquisition targets. King acknowledged that making those calls is hard, but did say it’s often a good idea to look at juniors staffed by people who have worked at major mining companies before since they know how to appeal to big miners.
When asked if he anticipates any tension between majors that want to get the best price for their money and juniors looking for deals that reflect the current gold price, King emphasized that every transaction is different and it’s important for investors to focus on their due diligence when making picks.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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