Haywood’s Mick Carew Explains Why Now Is an ‘Opportune Time for Consolidation’ in the Mining Space

The Gold Report: In Q2/15, Oban Mining Corp. (OBM:TSX), backed by Osisko Gold Royalties Ltd. (OR:TSX), consolidated a number of micro-cap gold equities in Québec and Ontario while Crocodile Gold Corp. (CRK:TSX; CROCF:OTCQX) merged with Newmarket Gold Inc. (NGN:TSX.V) in an effort to become a consolidator in its own right. These are two consolidation stories in the gold sector. Should investors expect more?

Mick Carew: As we approach what we hope is the bottom of the commodity cycle, we view this as an opportune time for consolidation in the mining space. We’ve seen a migration toward increased mergers and acquisitions (M&A) activity over the last couple of years. This year in particular has seen a number of high-profile mergers, including Alamos Gold Inc.’s (AGI:TSX) acquisition of AuRico Gold Inc. and Tahoe Resources Inc.’s (TAHO:NYSE; THO:TSX) acquisition of Rio Alto Mining Ltd. We’ve also seen major gold miners, including Barrick Gold Corp. (ABX:TSX; ABX:NYSE) and AngloGold Ashanti Ltd. (AU:NYSE; ANG:JSE; AGG:ASX; AGD:LSE) sell non-core assets to address debt concerns.

“Balmoral Resources Ltd.’s management team has a proven track record.”

We believe M&A is likely to continue as exploration funding is cut further and development pipelines are also affected. Furthermore, we think that this activity will be more pronounced as miners continue to refine their operating costs after the dramatic fall in commodity prices that started in 2011. M&A is commonly viewed as an indicator of a potential swing in market sentiment as intermediates and majors continue to scour for undervalued assets and potential targets. Therefore, any pick up in this type of activity could be deemed a positive.

TGR: Do you expect M&A activity to increase throughout the remainder of the year and perhaps even gain momentum next year?

MC: Yes, this activity and other novel …read more

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