February 25th, 2020 | 14:27 CET
Barrick Gold, B2Gold, Newmont - who buys which gold explorer?
The price of the troy ounce of gold is at its highest level in seven years. Currently, the precious metal costs around USD 1,650.00. The value of the troy ounce has thus increased by more than 30% in the past 12 months from under USD 1,270.00. Because the precious metal is considered a safe haven in uncertain times, it is clear how much investor uncertainty must have increased in recent months. As a result, margins and profits are rising for gold producers. The more that is mined, the more reserves must be discovered or acquired in order to continue producing gold in the future.
time to read: 2 minutes
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Author:
Mario Hose
ISIN:
CA0679011084 , CA11777Q2099 , US6516391066
Table of contents:
"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Author
Mario Hose
Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.
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Generating profits and securing reserves
Barrick Gold, B2Gold and Newmont are well-known gold producers. These experienced companies ensure that the demand for the precious metal can be satisfied. In market phases, when margins are particularly high, it is probably worthwhile to produce more in order to realize profits from reserves.
However, if the gold reserves in the ground are declining, then less could be mined in the future. This is a situation that investors would not welcome and that is why gold producers must continue to discover new reserves and develop areas or simply take over exploration companies or their areas. For this reason, exploration companies can also be an interesting addition to the portfolio for investors.
Mining is a billion dollar market
In order to get a feel for the dimensions of these gold producers and possible takeover targets, market capitalisation is a useful first impression. Barrick Gold is valued at the stock exchange at a price of 29.30 CAD with over 52 billion CAD. Competitor B2Gold closed yesterday at CAD 6.36 and was valued at over CAD 6.5 billion. Mining giant Newmont is the most valuable company in this selection with a market capitalization of over CAD 54 billion at yesterday's closing price of CAD 66.90.
Exploration performance opportunity
In addition to the profit development of these producers, investors are particularly interested in the question of who they could take over next. In this context, exploration companies probably offer the highest return for investors if successful. Companies with a focus on exploration that can successfully explore their areas and expand their reserves continuously reduce the risk for potential takeovers.
It is also not uncommon for producers to acquire additional areas from exploration companies or even take over the whole company in the neighbourhood - the latter can be most lucrative for investors, because often an attractive premium is paid. Next Sunday in Toronto, the four-day commodity conference PDAC, the world's largest industry meeting, will begin, providing an excellent platform for the personal exchange of information.
Osino Resources in Southern Africa
Osino Resources is a classic takeover candidate with areas in Nambia, which continuously collects and releases data on the areas through drilling programs. The company is led by CEO Heye Daun, who has already sold a company to B2Gold in the past and therefore knows what is important. Osino Resources closed yesterday at a share price of CAD 0.79 and was worth approximately CAD 67.5 million. Commodity legend Ross Beaty is invested in Osino Resources, giving the company a special charm.
Desert Gold Ventures in West Africa
The same applies to Desert Gold Ventures with projects in Mali, in which Ross Beaty is also a shareholder. The company yesterday announced results from its latest drill program and the value of its shares rose to CAD 0.155, while its market capitalization increased to CAD 14.4 million. Barrick Gold, B2Gold and Newmont are also active in West Africa. Above a certain proven amount of reserves, it is therefore possible that one of these gold producers will signal its interest.
Triumph Gold in North America
Triumph Gold is active in Canada and has territories in the Yukon. Newmont is already on board as a major shareholder through its previous acquisition of Goldcorp. The market value of the company is approximately CAD 24.7 million at yesterday's closing price of CAD 0.235. As the price of gold rises, Triumph Gold is also more likely to be completely acquired by Newmont or a third party might come in to take over the projects or Triumph Gold as a company.
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