The Coming Gold Stock Buyouts

by Gerardo Del Real

Back on February 23, 2021 I told you:

“In the gold space, which seems so boring right now, the producers are making money hand over fist. A lot of producers have $700 to $800 margins for every ounce of gold sold. Those balance sheets look healthy to me.

You should be able to deduce that you're going to see some mergers and acquisitions (M&A) coming at a pretty premium. I think that'll start up here soon.

And I think that's going to help ignite a resurgence of gold speculators.”

Fast forward a few weeks... and that's exactly what’s starting to happen.

Last week, Newmont agreed to acquire all outstanding shares of GT Gold (TSX-V: GTT) for C$3.25/share — a 38% premium to the 20-day volume-weighted trading average.

Yesterday, Gran Colombia Gold (TSX: GCM) announced it was acquiring Gold X (TSX-V: GLDX) for approximately C$315 million — a 44% premium to the 20-day volume-weighted average price.

It’s just the beginning.

Mid-tier and major gold producers blessed with swollen balance sheets, but cursed with a lack of quality projects to develop, need to replace gold reserves.

The premiums will continue and will lead to a re-rating higher of companies that have significant gold discoveries.

During "boring" periods in the market — like the one we’re experiencing right now in the gold space — a 40-50% move lower on light volume is common.

US debt-to-gross-domestic-product (GDP) ratio recently peaked at 135%.

Lumber prices are at record highs. Real estate prices are surging. Inflation expectations are at 12-year highs.

Everything is awesome. Until it’s not.

Those moves lower are gifts if you’re patient and know what you’re buying.

Hype and a trend will send prices higher during gold’s next leg up.  

Owning quality companies with quality assets will ensure that those gains are not a round trip.

Let's get it!