What if you could tell before a press release comes out that a company is poised to be bought out, possibly at a nice premium? Sounds good, right? By watching historic patterns, that might just be possible. The Gold Report reached out to experts who have been around through enough cycles to know and asked for the clues they watch that an acquisition might be imminent. From location and early investment to derisking levels, you just have to know what to look for to position yourself for a liquidity event.
There are certain points in market cycles where buyouts just make more sense than in others. Chen Lin, author of the popular stock newsletter What Is Chen Buying? What Is Chen Selling, sees a recent flurry of mergers and acquisitions (M&A) as an indication that we are, indeed, at the bottom of the gold market and can expect more consolidation—and at a premium. “We saw the start of a new phase of M&A happening when OceanaGold Corp. (OGC:TSX; OGC:ASX) bought Romarco Minerals Inc. (R:TSX), and Romarco shareholders realized a big premium for that,” he says. Add to that First Mining Finance Corp.’s (FF.TSX.V) merger with Gold Canyon Resources Inc. (GCU:TSX.V) and PC Gold Inc. (PKL:TSX). “Investors of those stocks were rewarded handsomely.” He continues, “A lot of companies with good balance sheets will try to take advantage of this downturn to pick up properties at rock bottom prices. This is actually a good time for those companies that can afford to do M&A.”
Lin clarifies that in many cases it is not the majors that are buying. “A lot of the big companies are in deep trouble. Many are selling assets. Barrick Gold Corp. (ABX:TSX; ABX:NYSE) was buying at the top of the …read more