Derek MacPherson and Jacob Willoughby of Red Cloud discuss a list of companies they think will be taken out in 2020.
Mergers and acquisitions were a major trend in the gold space in late 2018 and throughout 2019, and according to two experts the mining space will see more deals this year.
At the recent Prospectors & Developers Association of Canada (PDAC) convention, Derek MacPherson and Jacob Willoughby of Red Cloud spoke about their “endangered species” report, which lists 11 companies they think are likely to be acquired in 2020.
The list includes well-known names in a variety of commodities, including Dundee Precious Metals (TSX:DPM,OTC Pink:DPMLF) and First Quantum Minerals (TSX:FM,OTC Pink:FQVLF) on the larger side and GoviEx Uranium (TSXV:GXU,OTCQB:GVXXF) and Standard Lithium (TSXV:SLL,OTCQX:STLHF) on the smaller side.
The pair explained that large companies are likely to do deals first, with smaller ones following suit. “It’s certainly been a pattern in previous cycles,” Willoughby said.
“The big companies are the ones that are most in need of new projects and new assets to fill their pipelines, (and) they tend to have to transact at a higher level to get something that makes a difference with them,” MacPherson added. “We think it will be at that higher level where the M&A picks up initially.”
MacPherson and Willoughby also explained that they’ve laid out specific takeout scenarios for each company on their list.
“A lot of them are of a certain size where there’s not too many people who could be the acquirer,” explained Willoughby. “Some of them have had recent investments by certain groups … so there isn’t really a general consensus or correlation between the potential acquirers.”
When asked how investors can use the list to their advantage, the duo emphasized that M&A isn’t generally a good reason to buy into a company. However, said MacPherson, “If you like that stock or you like that theme, this is another reason to … invest.”
Watch the interview above for more from MacPherson and Willoughby on M&A activity in the mining space. You can also click here for our full PDAC playlist.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.