(Kitco News) - The gold price continues to set new all-time highs, with gold equities starting to get in on the action as M&A activity increases, says David Erfle, editor of Junior Miner Junky.
Erfle spoke to Paul Harris, host of Kitco Mining's Digging Deep, on April 1.
On March 27, Alamos Gold (TSX:AGI) said it would acquire Argonaut Gold (TSX:AR), including Argonaut's Magino mine in Ontario. The addition of Magino is expected to increase Alamos' gold production to over 600,000 ounces per year, rising to 900,000 oz/yr.
Under the $34 million transaction, Argonaut's assets in the United States and Mexico will be spun out as a newly created junior gold producer. The new-co will own the Florida Canyon mine in the US, as well as the El Castillo Complex, the La Colorada operation, and the Cerro del Gallo project in Mexico.
Erfle called the acquisition a bad deal for Argonaut shareholders due to the former CEO's mismanagement of the Magino mine's capital expenditures.
"This one had 10-bagger potential; we were looking at big gains in this thing. Unfortunately now, by the time it finally does get taken over, it's basically a take-under," he said. "No Argonaut shareholders have made money on the deal."
Erfle and his subscribers previously sold the stock for $1.90 per share.
He noted the take-over is exceptional for Alamos Gold, whose stock rose seven percent.
In the other recent M&A transaction, Mako Mining (TSXV:MKO) bought Goldsource Mines (TSXV:GXS), adding Goldsource's Eagle Mountain gold project in Guyana to Mako's Nicaragua-focused portfolio.
The addition gives Mako a pathway to more than 100,000 ounces a year of gold production.
Erfle said the deal is another "take-under" that is good for Mako shareholders but bad for holders of Goldsource Mines' stock.
Commenting on Agnico Eagle Mines (NYSE:AEM) becoming the world's second-largest gold producer, relegating Barrick Gold (NYSE:GOLD) to third place, Erfle said, "I think there's going to be a lot more M&A to come here" within the gold majors and mid-tiers.
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