Barrick Gold, Tembo Gold, MorphoSys - With which merger will 2022 start?

Barrick Gold joins Tembo Gold

It happened faster than expected. We had pointed out the takeover fantasy by Barrick Gold (Barrick) on November 24, and already on December 7, the first step was taken. Tembo Gold sold six prospects to Barrick. The large Bulyanhulu gold mine is directly adjacent to the 174 sq km Tembo Gold project property, reactivated only this year after a seven-year hiatus. It was political reasons that caused the pause. Since a change in government, mining is just now getting back on track.

The deal calls for Barrick to pay USD 6 million. This amount can increase to USD 45 million depending on inferred, indicated and measured gold deposits. In addition, Barrick commits to invest at least USD 9 million in the license area over the next four years. Barrick is also subscribing for just over 5.5 million shares at CAD 0.27 of Tembo, giving it a 5.5% interest in Tembo Gold. The sold areas have not yet been explored in detail by Tembo. The explorer thus retains its core area on which gold deposits of up to 79.1 g/t gold have been found. The transaction is expected to close in the first quarter following TSX Venture Exchange approval and certain regulatory requirements in Tanzania.

The proceeds from the deal come just in time for Tembo, which has identified 54 new drill targets based on historical data using artificial intelligence. It plans to drill 7,000m in the upcoming drilling program. Commenting on the deal, Tembo CEO David Scott said: "Barrick's commitment is a significant endorsement of the potential for gold discoveries in the area. The proceeds from the sale will allow us to seriously advance our exploration strategy." Barrick said the acquisition is an important step in its strategy to increase its growth opportunities in Tanzania and further evidence of the value creation potential of its partnership with the government.

The deal also offers several advantages for Barrick. First, the Company can report its first small acquisition. Pressure to find a suitable acquisition target has been mounting in recent months after the Company fell short in two major deals in North America. Since the change of government, Tanzania is again considered a very promising area. Another plus is the comparatively low cost, as the acquired areas are directly adjacent to the Bulyanhulu mine.

Barrick now has a first foot in the door at Tembo Gold and will certainly want more if exploration continues to be positive. Finding good gold mines has become difficult. From that point of view, both parties can be very pleased. One gets an important and large strategic partner, and the other has secured access to a potentially significant gold deposit even before it goes into production. So far, the market has not shown much interest in this deal. Tembo Gold's stock briefly spiked to CAD 0.355 before falling back to CAD 0.25, where the brief rally had started. The next support is at CAD 0.235. At Barrick, the news completely fizzled out, and the stock fell to CAD 22.83 last week. The next support levels are close together at CAD 22.55 and CAD 22.30.

MorphoSys - Is a takeover getting closer?

Both boerse-online and Manager Magazin see a possibility for a takeover of MorphoSys. In August, the rumors already arose when the share price was still around EUR 47. In the meantime, the price is only EUR 33.43 and thus brings a market capitalization of a good EUR 1.1 billion to the scales. The acquisition of Constellation Pharmaceuticals alone cost EUR 1.5 billion. When this news was announced, the share price was EUR 72. So you could say that the acquisition has made MorphoSys itself a takeover target.

Incyte was brought into play as a possible buyer, the US pharma partner of all things. The two companies are working together on Tafasitamab, among other things. There, there were good results in the RE-MIND2 study according to the report of December 11. The drug significantly improves the chance of survival compared to conventional therapies. The lower the MorphoSys share price, the more likely a takeover can happen. It would be bitter if it were really the own partner. So far, however, these are rumors, none of which have been confirmed.

However, the fact is that the share is constantly falling, no matter how good the news is. Even exceeding analysts' expectations in the third quarter or positive results from studies could not slow down the continuing downward trend. A new multi-year low of EUR 31.57 was reached as recently as December 6. If the low is no longer broken on a closing price basis, the share would have formed a 3-fold bottom. Courageous investors could then dare to enter. However, we would wait for a break of the downtrend.

Takeovers are not always crowned with success. An initial entry, such as Barrick's with Tembo Gold, offers advantages to both sides and, if successful, the partnership can be expanded. If one acquires a company, as MorphoSys did with Constellation Pharmaceuticals, there is a risk of being taken over.