Gold M&A is hotting up and this junior is already on the radar
Link copied to
Special Report: Last week’s big news of a $16bn “super merger” between Saracen and Northern Star proves the majors are getting serious about synergies and bolstering their resource inventories.
2020 has had a slower start when it comes to mergers and acquisitions in the gold space, with just $US9.8bn ($13.6bn) worth of deals either completed or agreed upon so far, according to Bloomberg.
That is a long way off the $US26bn worth of deals done in 2019.
But market commentators reckon the Northern Star (ASX:NST) — Saracen Mineral Holdings (ASX:SAR) tie-up could be the catalyst for a whole lot more gold M&A activity, especially with the high profit margins gold producers will be enjoying with the price back up over $US1900/oz.
The fact that cashed up producers are hungry for more gold is good news for potential small and medium-sized takeover targets.
One junior that is already on the radar of the bigger players is Alto Metals (ASX:AME).
The $39m market cap explorer has just successfully fended off its third low-ball takeover attempt.
Shareholders were again not on board with the last unsolicited off-market takeover offer lobbed by privately owned Habrok Mining, which lapsed on October 1 with less than 1 per cent of shareholders accepting the 7c per share on the table.
Habrok’s capitulation came after Chinese-connected Goldsea Australia Mining allowed a competing cash offer to lapse in July as Foreign Investment Review Board changes complicated its plans.
Going back to last year, an all-scrip offer from fellow ASX gold junior Middle Island Resources (ASX:MDI)expired in December after securing less than 1 per cent of acceptances over the nine months it was open for.
Investors are starting to realise the value of the patch of ground Alto is sitting on in the Sandstone region, which has become somewhat of an exploration hotspot.
“Three separate companies in the past 18 months have clearly recognised the latent value within our landholding at Sandstone to the point of making takeover offers,” Alto managing director Matthew Bowles said.
The company’s three suitors obviously clearly see the value in Alto’s project, but for the company it’s all about getting out there and doing the drilling, and there have been some big shareholders come in and support that strategy.
Alto recently completed a $5.5m capital raising that was done at a premium to the Habrok offer, to fund a 30,000m reverse circulation drilling program at Sandstone testing along the Lords’ corridor as well as a number of regional targets.
Alto’s ground position at Sandstone – which is in WA’s East Murchison region, host to numerous multi-million-ounce deposits and producing mines – covers 800sqkm of the Sandstone greenstone belt.
“It is unusual for a company of our size to have such a dominant position on an entire greenstone belt and I have no doubt that is one of the reasons we’ve attracted the takeover interest,” Bowles said.
“The Lords’ corridor is where our focus will be in the short-term, but there are so many other prospective areas yet to be tested within the broader project.”
More than 1.3 million oz of gold has been produced from the project itself since the 1890s, including from the shallow Lord Nelson and Lord Henry pits that lie 3km from each other in the south-east corner of the tenements.
However, past owners were only focused on the near-surface oxide material and very little drilling has been undertaken below 100m depth.
Following an update in May that incorporated shallow mineralisation identified along 200m of strike to the south of the pit, Lord Nelson now contains an inferred resource of 109,000 oz at 1.9 grams per tonne (g/t).
Lord Henry, meanwhile, contains a higher confidence indicated resource of 65,000 oz at 1.6g/t as well as a small inferred resource, while the global indicated and inferred resource for Sandstone stands at 331,000 oz at 1.7g/t.
Mineral resources are categorised in order of increasing geological confidence as inferred, indicated or measured. By moving resources into the indicated category, it means a company has sufficient information on geology and grade continuity to support mine planning.
A glimpse of the possible upside has come in recent months, with Alto returning further strong results from drilling around and beneath the Lord Nelson pit, including 16m at 5.1g/t gold and discovering the new Orion Lode to the south, which has returned results including 29m at 3.5g/t.
While other junior explorers felt the brunt of the COVID-19 induced market bottom in March, Alto has continued to trend higher and is now up 267 per cent from around 3c in early February to 11c currently.
This article was developed in collaboration with Alto Metals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.