Golden Days: We asked five fundies to name their junior gold takeover targets, and they didn’t disappoint

• Gold is soaring, closing on US$4000/oz
• That’s providing a fertile environment for M&A, with more certain to come
• We asked five fundies who they think is the standout junior gold M&A target

Yet another gold merger came to light on Monday morning, as Guinean developers Robex Resources Inc (ASX:RXR) and Predictive Discovery (ASX:PDI) announced a $2.4 billion merger of equals that will create a +400,000ozpa West African producer from 2029.

The Matt Wilcox-led company will seek to bring the large Kiniero and Bankan gold projects into production 30km apart in Guinea, also milking cash from the 50,000ozpa Nampala gold project in Mali in the meantime while those are under construction.

It’s the latest example of the fever to grow through deals in the gold sector, with the companies seeking ASX 200 index inclusion by building a producer of serious scale through the scrip tie-up.

Predictive holds a potential top 10 African gold mine at the 5.5Moz Bankan and has major producers Perseus Mining (ASX:PRU), Lundin and Zijin on its register. Robex has the whip hand though. The deal doesn’t require PDI’s approval, with the key hurdle a two-thirds yes vote from RXR holders.

Whatever happens, with gold prices heading past US$3900/oz in the midst of the US Government shutdown – close to A$6000/oz – there’s little doubt more deals are going to come.

With the uncertainty caused by Donald Trump’s controversial trade and economic policies, China’s stumbling economic recovery, war in the Middle East and the continued belligerence of Putin’s Russia in Ukraine and beyond, gold status as a safe haven is pushing it to new heights.

“Gold’s fundamental value has always been as an insurance policy for investors and at the moment the premium for that policy that investors are prepared to pay is the highest on record,” MineLife founder and senior resources analyst Gavin Wendt told Stockhead.

“And I think … the fact that they’re prepared to pay such a high premium, that gold is at record levels, indicates the level of angst and the level of concern that’s out there in the investment community both about the economic outlook but in particular the risk factors about political instability.”

Bullion is up 48.68% YTD, on track for its best annual performance since 1979, while ASX gold producers have clocked up collective gains of almost 100%.

But that doesn’t mean the upside is tapped.

Argonaut last week lifted its gold price forecast to US$4000/oz in the near term, peaking at US$4500/oz by the end of 2027. State Street says there’s a 75% probability of gold hitting US$4000/oz in this quarter or the next, a call that already looks conservative.

Even bears like Citi have changed their tune, with strategist Max Layton recently lifting his price target to US$4000/oz.

Gold’s pro-cyclical M&A

While the obvious cliché is that acquisitions should be made at the bottom of the cycle, there’s a good reason why we tend to see more when the cycle is in an upswing.

Although asset prices are inflated, cash generation across the producers and the ability to secure finance for growth initiatives are both stronger.

That makes now the ideal time to grow, either organically through exploration or inorganically via mergers and takeovers.

Previously the interest was around the big end of town, who received the love of the market first as the gold price rose.

Now that bullion is fetching well over double the average all in sustaining cost across the Australian market, that affection has trickled down to developers whose projects previously looked marginal. That makes their assets all the more valuable to would be acquirers seeking to grow cash flows and attain market relevance.

“There’s just a tidal wave of money in the sector. There’s more money in the sector than ever,” Wendt said.

“Investors are saying, let’s go out and let’s fund corporate activity because it’s a hell of a lot quicker than going through a feasibility study and getting approvals to develop a mining operation. Let’s go out and buy ounces.

“You’ve got situations that are still sitting on resources, that are waiting for funding to come in.

“There’s a really, really nice marriage there to be had between companies that are already established producers … and companies that have got projects that are on the drawing board who need funding.”

Takeovers tend to be great for investors in the target stock, either giving access to a larger company with stronger growth prospects and potential for index inclusion in a merger of equals (think PDI and Robex), or a premium well above the traded value of the smaller party’s shares.

‘How Much a Dollar Cost’

The other factor at play is the Aussie dollar.

Trading at around 66 US cents, that makes Aussie companies attractive for a couple of reasons.

Number 1, Australian companies’ shares look cheap to international investors and corporates holding US dollar denominated currency.

Secondly, Aussie companies pay their labour, power and equipment costs in the cheaper Aussie dollar. Since the gold price is pegged to the US dollar, that means all other things being equal they get better margins than companies operating overseas, making not just Australian companies, but also domestic operations, enticing.

“The dollar has lagged behind some of the other world currencies, certainly compared to the US,” Wendt said.

“That could change because we are a commodity currency. So once commodities really start to pick up, if they do, you’d see our dollar start to increase in value and look, I’m surprised it hasn’t increased already when we’ve still got iron ore at 100 bucks, we’ve got gold prices (at record levels).

“We probably just need a few other commodities to take off again.

“Irrespective … it provides a great opportunity for our producers and they’d probably love it to stay exactly where it is.

“It sort of segues back to a cashed-up overseas gold predator looking at a (mid-tier or junior) company … because their US dollar goes a hell of a lot further in Australia.”

With that in mind, we asked Wendt and four other fund managers who they think the best junior gold target in the Australian market could be.

Hedley Widdup – Lion Selection Group

Medallion Metals (ASX:MM8)

You sometimes get the sense that a shareholder register is clamouring for a takeover because they feel that could be the only pathway to value – far from the case in Medallion.  I think the holders feel they are shareholders of a wonderful asset and have great confidence in the board and management to deliver it with a perspective of strong value realisation in that time.

Medallion has a decent sized resource inventory, and for me this is a pre-qualifier that it could one day be looked at for a takeover.  In fact, a company called Phillips River owned the Ravensthorpe project years ago and was taken over by Silver Lake Resources.  So we don’t need to speculate – the inventory, which was smaller than it is now, has been the subject of M&A before.

Clearly Medallion have cleverly dealt themselves into a position where they are on a low cost and short time pathway to being a producer by acquiring the Forrestania nickel plant from IGO (ASX:IGO), which they plan to repurpose to process gold.

In my view Medallion are going to turn Ravensthorpe into an asset that has a modest (60-100kozpa) production, a cost structure that provides for strong cash flows and a reasonably strong case of extending the life of the asset. it has similarities to Deflector, which was acquired by Silver Lake (now Vault Minerals (ASX:VAU)) in its Doray Minerals takeover.

I think that provides two angles on M&A potential:

1. In a merger style combination with a similar sized peer, where there is a genuine 1+1 = 4 equation by leap frogging to a size of company that attracts greater institutional ownership.
2. Where Medallion decides to be the acquirer, to consolidate an area that they will open up as a gold production district via their own deal and development work. Their strong value and limited need to raise money provides them an exceptionally strong platform for this.

Emanuel Datt – Datt Capital

TG Metals (ASX:TG6)

TG6 holds an important strategic asset in the Forrestania Greenstone Belt, an emerging gold camp in Western Australia. The region is infrastructure rich with a number of major mineral projects in the region.

The Van Uden gold project currently holds circa 220,000oz of gold, however it was last drilled when gold was under A$1500/oz relative to current prices of ~A$5800/oz.

The company intends to aggressively accelerate drilling to increase confidence in the present defined resource and to explore for extensions to this mineralisation.

Of late, acquisitive neighbour Forrestania Resources (ASX:FRS) has joined the register buying 9.8% of the Company. At a modest $30 million odd market cap, there may be significant upside in the case of exploration success or M&A interest in the near-term.

Gavin Wendt – MineLife

Barton Gold (ASX:BGD)

Barton has over 2.2Moz in gold resources including ~300,000oz in close proximity to its permitted Central Gawler mill, which it is planning to return to operations by late 2026 in a staged development.

(In WA) you get to that magical half a million or 1Moz mark and then you pretty much can just sit back and wait for one of the cashed-up predators in your region with a plant to either make an offer for you or fund you into production then make an offer down the track.

Barton is a little bit different because it’s in South Australia in the Gawler Craton. There are no cashed-up peers (nearby) to make an offer for the company.

My view and why I like it is because it’s relatively unencumbered, it’s got its own strategy on how to develop its assets and I would think perhaps the more logical acquirer would be an overseas gold play that doesn’t already have exposure to Australia.

South Australia is a fantastic place to operate … given Barton’s resource size, the fact that it has a clearly defined path to production, it does have infrastructure there that can be easily refurbished … I think Barton still is a real standout in terms of its market capitalisation and what it offers.

The Gawler Craton has been unloved for 20 years in terms of resource upside, but if you have a look at what’s going on with the old SIPA Resources … now Auravelle Metals (ASX:AUV), I think there’s a big picture there that it’s probably untapped as far as the gold upside of that of that Gawler Craton.

Stephen Gorenstein – Ari Funds Management

Vault Minerals (ASX:VAU)

Vault is still trading at a discount to its peers, and its large resource base and state of the art mill at King of the Hills provide the key to unlocking the Leonora gold district.

For the right acquirer it can provide a step change to production in the Leonora region, allowing combined production  of 500,000-750,000ozpa.

Andy Clayton – Precision Funds Management

Caprice Resources (ASX:CRS)

Caprice Resources Ltd has just commenced a 20,000m drilling program at its Island gold project in the Murchison region of WA that is located between two 1Moz projects. Previous results have confirmed high grade mineralisation with some excellent intercepts – 11m at 17.3g/t Au, 28m at 6.4g/t Au and 15m at 4.6g/t Au and numerous +10m intersections at a grade of >5g/t.

We think there is excellent potential for a high grade resource to be defined at Island with very similar geology and mineralisation to that seen at the Break of Day deposit, which is located only 20km to the south and was previously discovered by Musgrave Minerals before being acquired by $7.5bn capped Ramelius Resources (ASX:RMS).

Break of Day has been an excellent acquisition for RMS with production of ~98,000oz at a AISC of $794/oz in FY25 generating free cash of $287m. We think that if CRS can define a high grade resource then it will be highly sought after, with the obvious suitors being Ramelius or Westgold Resources (ASX:WGX) as both have projects and operating mills in the area.

Disclosure: Precision Opportunities Fund owns shares in Caprice, as does the fund manager.

At Stockhead, we tell it like it is. While Caprice Resources, Medallion Metals and TG Metals are Stockhead advertisers, they did not sponsor this article.

The views, information, or opinions expressed in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.