(Kitco News) – Major gold companies shouldn’t wait too long before acquiring juniors, says John Feneck, founder and CEO of the Feneck Commodities Report.
Feneck spoke to Paul Harris, host of Kitco Mining’s Digging Deep, on April 12.
Harris kicked off the discussion with two M&A (mergers and acquisitions) announcements.
Australia’s Westgold Resources (ASX:WGX) acquired Karora Resources (TSX:KRR), creating a mid-tier miner capable of producing about 400,000 ounces a year.
Revival Gold (TSXV:RVG) agreed to buy privately held Ensign Minerals for CAD$21.9 million, accelerating its path to open-pit heap-leach gold oxide production initially at 75,000 oz a year.
Feneck called the second deal accretive because it increases Revival’s heap leach gold resources per share. However, he criticized the company for doing the transaction when its stock price was so low.
In contrast, the Westgold acquisition was done with its stock ascending, which Feneck liked.
Feneck sees US Gold Corp. (NASDAQ:USAU) as a takeover target, but he’d like to see the stock rise higher than its current $4.43 a share.
“We’re looking at 10 bucks. I mean, this is a company that has 9.5 million shares out and it trades on the NASDAQ. In a good gold market, this thing’s going to rip,” he said.
Harris mentioned two junior gold financings. Rio2 Limited (TSXV:RIO) announced a CAD$10 million private placement that was upsized to $23 million. i-80 Gold Corp. (TSX:IAU) increased its CAD$85 million bought deal financing to $100 million.
“Two big financings there suggest that the window is opening again for gold stocks,” Harris observed. “I totally agree with that,” said Feneck, adding, “I think we’re back to a 2020 kind of mentality, where people are at Google searching gold stocks and trying to pick some winners here, which is really exciting if you’re positioned ahead of this.”
Research by Harris showed last year that gold companies returned $4.6 billion to shareholders. Asked what gold companies should do with their profits, Feneck said:
“I’d like to see two things. One is, if you’re one of the large names in GDX, like a Newmont, an Agnico, et cetera, this is the time to do deals. Don’t wait another year for prices to be $2,500, $2,600 gold. Then you’re talking to juniors that don’t want to sell because their share price has gone up maybe 100 to 200 percent in some cases.
“The majors, to me, are just super slow at doing what they need to do to fortify reserves.”
Feneck is bullish on metals dominated by China that have few junior explorers, such as tungsten, used to make ammunition.
In recent drilling highlights, Feneck picked Faraday Copper’s (TSX:FDY) 117 meters at 0.4 percent copper intercept at its Old Reliable target in Arizona.
Harris chose Camino Minerals (TSXV:COR), which reported 25 meters at 1.34 percent copper near surface at its Los Chapitos project in Peru.
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