The Next Takeout Targets?



On January 9, 2017 Auryn Resources (TSX: AUG, OTCQX: GGTCF) announced that it had entered into an agreement with Goldcorp Inc. (TSX: G, NYSE: GG) whereby Goldcorp would maintain a 12.5% interest in Auryn.

In addition, Auryn and Goldcorp entered into an Investor Rights and Obligations Agreement whereby, as long as Goldcorp maintains a 5% or greater equity ownership interest in Auryn:

    •    Goldcorp will have the right to participate in future Auryn equity issues in the amount necessary to maintain up to a 12.5% interest;

    •    Goldcorp will have a right to match certain non-equity financings; and

    •    If Goldcorp chooses to sell more than 2% of Auryn’s shares, Auryn will have the right to designate buyers and Goldcorp will vote its shares to elect the Auryn recommended director nominees.

Total gross proceeds to Auryn totaled approximately C$41.1 million. More than enough to fund one of the most aggressive drill programs we’ll see in 2017. 

A program that will consist of approximately 55,000 meters at a cost of C$35 million spread across Auryn’s portfolio of six projects. 

I spoke with Executive Chairman of Auryn, Ivan Bebek, about the program. You can listen to that interview by clicking on the following link

It was interesting to me that the investment in Auryn by Goldcorp occurred just days before Goldcorp announced they were disposing of two assets.

It’s clear that Goldcorp is positioning itself to use Auryn’s experience in making discoveries in order to avoid the costly and burdensome process that comes along with a major exploring for discoveries versus a junior. 

A point that Mr. Bebek was keen to make in the interview. 

It’s not a stretch to say that if Auryn achieves its goal of making meaningful discoveries in 2017, that Goldcorp may come knocking with a much bigger check than the current market cap assigned to Auryn. 

Keep an eye on that drill program.

The Goldcorp/Auryn agreement was followed by a story in the Financial Post that reported that although  it expects M&A in the resource space, most executives told a mining conference in Toronto that they are mostly interested in partnerships.

"There are too many players for fewer and fewer resources," said Agnico Eagle Mines boss Sean Boyd, adding that industry consolidation could be necessary to eliminate overhead costs such as head offices. 

Underinvestment over the past few years has led to weak project pipelines and limited merger-and-acquisition activity, Mr. Boyd said.

There are very few quality assets out there in good jurisdictions. Two stand out.

1) Midas Gold
2) Almaden Minerals 

Midas Gold controls the world class Stibnite gold- antimony project, located in the historic Stibnite- Yellow Pine mining district in central Idaho.

Midas Gold is currently in the permitting stage and has over 6.6 million ounces across all categories and is in the midst of a drilling program that has had some spectacular drill intercepts.

Intercepts that include 200 meters of continuous gold starting at surface. 

In addition the company has important silver, tungsten and antimony credits that could help expedite the permitting process under the new Trump administration.

The are very few 6.6 million ounce gold deposits with a reasonable chance of getting in production.

If permitting goes as planned, Midas could be in position to be going into production in a much better gold environment than the one that exists today. 

The leverage to the upside might simply be too good to pass up for majors looking for a world-class asset with scale.

I’ve said before that Midas Gold (TSX: MAX)(OTC: MDRPF) represents a bargain at today’s prices even if it never found another ounce of gold, although it is clear that when it’s all said and done there will be many more ounces than the 6.6 million ounces currently defined.

Almaden Minerals (TSX: AMM)(NYSE: AAU) owns 100% of the Tuligtic project in Puebla State, Mexico. Tuligtic covers the Ixtaca Gold-Silver Deposit, which was discovered by Almaden in 2010.

Almaden has approximately 4.2 million ounces AuEq across all categories.

Metallurgy is excellent and Ixtaca represents one of the few truly poly-metallic deposits in the space.

In addition the exploration potential is excellent as recent drilling has demonstrated. The most recent results reported included 105 meters of 1.20 g/t Au and 87.1 g/t Ag.

The company has a mint condition mill it purchased during the latest downturn and will be publishing a PFS in late Q1/early Q2.

I visited the property last summer and was also impressed by how pleasant the work conditions are. 

There’s several confidentiality agreements in place and like Midas Gold, there simply aren't that many available projects with this type of resource in place and exploration upside.

Auryn Resources, Midas Gold and Almaden Minerals are three companies everyone should have their eye on in 2017.

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