It’s no secret the equity markets have been tough in recent months and gold juniors have definitely not been immune to the pain.

This has seen an uptick in consolidation in the sector as the small caps do everything they can to secure their future.

Just yesterday, Intermin Resources (ASX:IRC) and MacPhersons Resources (ASX:MRP) revealed they were planning on merging to create a company with more scale.

Intermin managing director Jon Price told Stockhead consolidation is necessary in the junior gold space.

“I think it is heating up. I think it’s necessary to gain that sort of critical mass and I think we’ll see more of it in the next couple of years,” he said.

“If you don’t have north of a million ounces, a strong financial position, a good quality board and management team then you’re in that cycle of continuously raising money in a very tough market and continuing to grow organically as much as you can.

“You can find a new discovery, but new discoveries are difficult to find and that’s testament to what’s been happening over the last few years with not that many new big discoveries being found.”

But a tie-up like Intermin’s and MacPherson’s will create a company with a resource of 1.15 million ounces, a cash position of $9m-$10m, two assets and a market cap of around $60m.

Individually, Intermin has a market cap of about $34.1m, while MacPhersons sits at around $30.2m.

Mr Price says MacPherson’s Boorara project, 10km east of Kalgoorlie in Western Australia, provides the scale and can underpin a standalone processing plant.

Meanwhile, Intermin’s resources — which are higher grade — can be easily trucked to a centralised processing plant at Boorara.

“Without both of those ingredients you really can’t move into a standalone production profile,” Mr Price said.

“So if you have that larger market and you have that larger resource base and you can demonstrate visibility to a profile of 80,000 to 100,000 ounces a year for an initial five years, then the market really takes notice of that pre-production status, that emerging sort of mid-tier status, which is where we want to be and we’re off to a good start.”

We have also seen the likes of Spitfire Materials (ASX:SPI) and Excelsior Gold (ASX: EXG) merge.

The combined company has a 2.1-million-ounce resource base, giving it the critical mass needed to join the producer ranks next year.

Silver Lake Resources (ASX:SLR) and Doray Minerals (ASX:DRM) also announced last month their union, which will create a 240,000-ounce per year mid-tier producer.

Patersons Securities head of research Cathy Moises also sees the consolidation in the junior gold space gaining momentum.

“We’ve had a number of new companies start up and inevitably they look to maximise shareholder value by some mergers,” she told Stockhead.

“It’s usually economically beneficial for both sides provided the pricing is correct, and generally they’re looking to get to that next size.

“Because we see the market leaders such as Evolution and Northern Star trading at premiums to the majority of analyst’s valuations out there and I think the increased liquidity certainly helps if you do a merger.”