A report published by RBC this week points to a ripe climate for M&A in the gold mining sector in 2017 as a result of a combination of declining reserves among major gold producers and stronger balance sheets. 

Quality projects are scarce with RBC stating that out of its 270 company universe there are only 5 resources larger than 5.2 million ounces Au with grades above 2.4 g/t Au. This means that the majors (Barrick, Goldcorp, Newmont, etc.) will be forced to look at earlier stage assets and likely start taking more 'toehold stakes' in juniors - "Optionality" is sure to be a buzz word in 2017.

Some notable producer equity stakes in juniors:

RBC names Dalradian $DNA Continential $CNL Integra $ICG and Sabina $SBB as the most likely pre-production takeover candidates due to the scale and grade of their projects. Somewhat surprisingly (due to its size) Detour Gold $DGC is mentioned as a potential takeover candidate if its shares get any cheaper. 

Detour Gold (Daily)

I think RBC is right and the C$15 level is likely to be a floor for DGC shares, below which a takeover would become probable. 

Guyana Goldfields $GUY and Alacer Gold Corp $ASR are also mentioned as offering the most value of the single asset producers in RBC's coverage universe. Both of which have constructive charts (see below).

The main takeaway from the following chart of gold sector M&A since January 2010 is that a rising gold price stirs the animal spirits (we saw a flurry of M&A activity last spring as the gold price lifted off from a multi-year low) and results not only in increased M&A activity but also much higher valuations for deals:

2010 (rising gold price environment) saw a record for total deal value while 2013 (gold crash year) saw the lowest total deal values in the last two decades.

After looking at the charts of the 20+ companies mentioned by RBC I picked out a handful which stand out from the crowd in terms of having constructive charts with strong signs of recent accumulation:

Alacer Gold Corp (Daily)

Head & shoulders bottom with breakout offering a measured move target of ~C$3.45 and a near term target of C$3.00.

Integra Gold Corp (Daily)

Strong accumulation in first few weeks of 2017.

Guyana Goldfields (Daily)

Weekly close above C$7.00 targets C$9.00+ as cup & handle bottom is completed.

Nighthawk Gold Corp. (Daily)

Admittedly NHK has had a big move to begin 2017, however, a pullback to the C$.60 area should be a buying opportunity.

Sabina Gold & Silver (Daily)

SBB continues to flirt with a breakout above C$1.45 and a fill of last June's big gap down from C$1.73.

With several key factors already perfectly aligned for a surge in gold sector M&A, all that's left is for gold to kick into bull market mode and 2017 could be a year for the record books in terms of M&A activity.


DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.