Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Tuesday, January 02, 2007

2007 Should Be Very Good for Mid-Tier Gold Miners

Here's a snippet from a December 31st article from MineWeb...

With the majors desperately looking to replace declining gold reserves, it could perhaps be the mid-tier producers with decent reserves and low cost of production, or explorers with large (2-3 million ounce plus) defined resources where one should look to invest – particularly if these resources are in a less politically or geologically risky environment (relatively rare at the moment unfortunately). There is almost certain to be more M&A activity in the precious metals sector in 2007, so some of these will be swallowed up – usually at a good premium to the share price so the larger companies can maintain their resource positions.

XX My Take: Gold-company acquisitions surged in 2006 to the highest level in at least a decade. There were 357 deals valued at $24.3 billion. That is way, way more than the 341 mergers and acquisitions in 2005 worth $16.2 billion.

Why are miners so eager to make deals? For the simple reason that mines are being depleted faster than new reserves are being found. In my view, this M&A feeding frenzy should continue in 2007 – in fact, it will likely become even more frantic.


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