SSR – Alacer Gold merger gets shareholder approval

SSR Mining (TSX: SSRM) and Alacer Gold Corp. (TSX: ASR) (ASX: AQG) announced Friday the receipt of shareholder approvals for the previously announced at-market merger.

In May, Vancouver-based SSR Mining agreed to a deal to acquire its Canadian counterpart in an all-stock, zero-premium deal valued at C$2.4 billion ($1.7 billion).

The business combination would see Alacer’s flagship Çöpler mine in Turkey added to SSR’s existing portfolio that includes the Marigold gold mine in Nevada, the Seabee gold operations in Saskatchewan and the Puna operations in Jujuy, Argentina.

On closing, each of the Alacer issued and outstanding common shares will be exchanged for 0.3246 of an SSR Mining common share, the companies said in a joint statement.

The transaction was approved by approximately 99.9% of the votes cast by Alacer shareholders at the special meeting of shareholders that was held Friday, representing 79.9% of eligible shares voted. SSR Mining shareholders approved the transaction by approximately 96.5% of the votes cast.

Novagold dismisses chance of “scam-based” class-action

Canada’s Novagold (TSX, NYSE: NG), which is suing short-selling firm J Capital Research (JCAP) for defamation, said a US law firm potential attempt to launch a class suit against the company on alleged securities fraud would be based on “malicious and false information”.

Lawyers at Hagens Berman said this week they were investigating whether Novagold had misled investors about the viability of its Donlin gold project, in Alaska.

Novagold said the  move by the San Francisco-based law firm’s appeared to be entirely based on JCAP’s “tapestry of deceit” as well as “false and misleading statements” about the company and its 50-50 development partner in the project, Barrick Gold (TSX: ABX) (NYSE: GOLD).

In a report issued on May 28, JCAP accuses the gold junior of “systematically” misleading investors about the proposed gold mine over the last 15 years.

NovaGold and Barrick’s Donlin project, with measured and indicated resources of about 39 million ounces of gold is considered one of the largest open-pit gold deposits in Alaska.

JCAP, a company founded in China a decade ago that usually targets overvalued media and tech companies for short-selling, said the Donlin Gold project would “never be built” and “in short, is a stock promote, not a mining plan.”

Unimportant asset

JCAP backed its claim by saying that Doling insignificance can be proven by Barrick’s decision to not include the project in its new 10-year production plan, which is aimed at becoming the most valued gold company.

Novagold’s chairperson, Thomas Kaplan, said Hagens Berman’s solicitation of shareholders was based on a “fundamentally flawed report”, somehow expected in a “dirty game”.

“Even with Novagold’s line-by-line factual rebuttal available to them, the law firm did nothing more than repeat a slapdash mixture of errors of fact, falsehoods, and discredited assertions,” Kaplan said.

While Novagold would not be issuing responses to “every dart aimed at it”, he said the company highlighted Hagens Berman’s press release, because it was “emblematic of the amateurishness and abject ignorance of the public statements made recently about Novagold by JCAP and now repeated by others”.

Kaplan encouraged owners to assess whether they had suffered damage from the reports and to seek advice regarding potential redress available to them from the “real perpetrator of wrongs: JCAP”.

Novagold and Barrick reopened the Donlin camp in June, following a two-month hiatus brought by measures to help reduce the spread of covid-19.

The companies anticipate that most of the planned program, aimed at confirming recent geologic modelling concepts and testing potential extensions of high-grade zones, will be completed by the end of the year.

Barrick Gold escalates dispute with PNG over Porgera mine

Canada’s Barrick Gold (TSX: ABX) (NYSE: GOLD) has served a dispute notice to the Papua New Guinea (PNG) government over the country’s refusal to renew a licence for Porgera mine.

The world’s second-largest gold producer said in the document that PNG had violated a bilateral investment treaty with Australia, as well as international law governing foreign investment.

Barrick and its Chinese partner, Zijin Mining, temporarily halted operations at the mine in Enga Province late in April. The decision followed Prime Minister James Marape’s decision not to renew Porgera’s long-sought lease.

More to come…

Royal Helium closes private placement, stock soars

Royal Helium (TSXV: RHC) closed on Thursday its oversubscribed private placement first announced in June. Royal raised proceeds of C$1 million through the issuance of 20,000,000 units at a price of $0.05 per unit.

Each unit consists of one common share in the capital of the company and one common share purchase warrant. Each warrant entitles the holder to acquire one common share at a price of $0.07 for a period of 12 months.

The securities issued under this private placement are subject to a statutory four-month period ending November 10.

With the financing closed, Royal will be expanding on its exploration plans and finalizing the targets of the initial drilling program for helium in Saskatchewan, CEO Andrew Davidson said in a media release.

At market closed Thursday, Royal Helium’s stock was up over 27%. Shares were traded 261,400 times, over three times the average daily volume of 75,311. The company has a C$5 million market capitalization.

Gold price and reserve depletion to drive M&A – BofA

The total transaction value of mergers and acquisitions in the second quarter of the year reached $2.86 billion in twelve deals, with Chinese buyers acquiring gold assets and smaller companies joining forces to become mid-tier producers, the Bank of America Securities says in a new report.

The investment bank noted that the 12 transactions represented the highest quarterly total since the fourth quarter of 2012, and the dollar value was nearly double that seen in M&A deals during the first quarter of 2020.

“For the H2 2020, the need to replace reserves mined in 2020 plus the higher gold price will be catalysts to drive further M&A,”

Bank of America

It also pointed out that one of the trends in the second quarter was the preference for assets already in production or nearly in production. “Six of the twelve transactions in Q2’20 were for assets currently in production,” the report states.

Describing the current investment climate as a “buyer’s market for companies,” Bank of America (BofA) noted that five of the transactions with reserves that took place in the second quarter of the year “were priced at a 23% discount to the prevailing gold price, below the historical range of -20% to +10%.”

“The data indicates that H1’20 was one of the best periods to be a buyer of gold companies, mines and projects,” the bank concluded.

“For gold company transactions, acquisition prices, relative to the prevailing gold price, were on average at the lowest level since 2011 and the second lowest since 1998.”

The bank also pointed out that “mega projects are back in vogue,” citing Artemis Gold’s C$190 million cash acquisition of New Gold’s Blackwater project in British Columbia, one of the largest open-pit gold deposits in Canada, which has “added over $200 million of new market value” to the buyer.

“This may put the spotlight back on companies sitting on multi-million oz. low grade gold megaprojects.”

In addition, of the 12 deals in the second quarter, seven had reserves and five had resources-only.

“The ‘elephant in the room’ was SSR Mining’s friendly $1.71 billion all-share merger with Alacer Gold on May 11 2020,” it states, which has created a +600,000 oz. gold producer.

“The remaining eleven transactions ranged in size from $27 million to $238 million. The global senior producers were absent from the M&A circus in Q2’20.”

Mid-tier producers that don’t do deals risk being ‘left behind’ by their rapidly growing peers.

Bank of America

Moreover, only half of the Q2 transactions were in mining-friendly jurisdictions (Canada, Australia and Ghana), illustrating that “political stability [was] less important in Q2’20.”

The M&A deal flow is unlikely to slow in the second half of the year, the bank forecasts, with higher gold prices and the need to replenish reserves.

“For the H2 2020, the need to replace reserves mined in 2020 plus the higher gold price will be catalysts to drive further M&A,” BofA commented in its July 9 report. “After years of underinvestment, we see production profiles under pressure and reserves in decline. The evidence is too obvious to ignore…At year-end 2019 total gold reserves for the global gold producers amounted to 612 million oz., down 30% from the peak of 875 million oz. at year-end 2012, equating to declining reserve life indexes.”

It predicts that with gold cresting $1,750 per oz., the result will be “windfall free cash flows and expanding valuation multiples” that will look a lot like the period of record M&A between 2010 and 2013. Mid-tier producers that don’t do deals, it reasons, “risk being ‘left behind’ by their rapidly growing peers.”

“An unintended consequence of non-core asset sales by senior gold producers (post the mega mergers in late 2018-early 2019) has led to a burgeoning ‘senior’ mid-tier producer sector marked by gold output in the 1.0-1.75 million oz. range,” the report states. “These larger more liquid producers are coming to the attention of global gold investors (likely at the expense of the smaller mid-tier gold producers [0.5-1.0 million oz.].”

The bank lists eight companies that are intermediate/mid-tier producers that it believes have “intriguing” mines and or development projects: Pretium Resources, Victoria Gold, Torex Gold, Wesdome Gold Mines, New Gold, Lundin Gold, Teranga Gold and Perseus Mining.

On the exploration and development front, BofA says its list of companies with interesting assets contains: Gold Road Resources, Osisko Mining, Rubicon Minerals (now Battle North Gold), Great Bear Resources, Gold Standard, Orla Mining, Sabina Gold & Silver, Marathon Gold, Okio Resources, International Tower Hill, Novagold, INV Metals, Premier Gold, MAG Silver, Midas Gold, Algold Resources, Eastmain Resources, West African Resources, Belo Sun Mining, Artemis Gold, and Sirios Resources.

One thing that might slow M&A down, of course, is the inability of companies during the current pandemic to conduct site visits of potential acquisitions. As a result, “acquirers excelling at ‘desktop’ analysis of assets could find an ‘edge’ over their competitors.”

(This article first appeared in The Northern Miner on July 09)

Haywood lifts gold price forecasts

Haywood Securities has raised its gold price forecast for the second half of 2020 from $1,650 per oz. to $1,800 per oz.

Next year the broker-dealer believes gold will average $1,700 per oz., up from its earlier forecast of $1,600 per oz., while 2022 should see the precious metal average $1,650 per oz., up from an earlier estimate of $1,550 per oz.

“We maintain our view that gold is now in the early days of a new bull market and would not be surprised to see gold push through the old 2011 high of $1,923 per oz. this year,” Haywood said in a July 9 research note.

At the same time, valuations “continue to be modest,” it notes, “with many stocks trading at multiples which are discounting gold prices well below spot prices.”

But Haywood says it is optimistic that valuations “will slowly start to improve as more generalists chase performance.”

“We believe that interest from the investor base will continue to broaden, and should focus on operational performance, balance sheet strength and execution history (in both operations and exploration environments), as well as now looking at growth potential of developing assets and asset portfolios within exploration through to producing companies. The importance of companies being able to deliver (get-on-base) remains paramount.”

In the mid-cap to junior gold producers, Haywood’s top picks are B2Gold, Equinox Gold, K92 Mining and Roxgold. Among the exploration and development-stage companies it likes Liberty Gold and Osisko Mining.

Greater economic uncertainty due to the coronavirus pandemic and worries about longer term inflation will continue to support lofty gold prices as investors seek safe haven investments.

Given that trend, Haywood says, “there has been increased M&A activity and continued market consolidation where targets are progressively becoming smaller and less advanced in profile.”

“Continued consolidation gives rise to more focus on generating alpha in smaller, notionally higher risk equities than has been the focus since gold started to move over the last 18 or so months.”

(This article first appeared in The Northern Miner)

MINING.COM MINUTE: Biggest stories of the week

MINING.COM MINUTE is a roundup of the biggest stories from the global mining and metals industry.

This week’s top stories:

  • Gates, Bezos-backed firm searching for cobalt in Canada – Read more
  • Gold price builds base above $1,800 with record in sight – Read more
  • Monster rally adds $250 billion to global top 50 mining companies – Read more
  • In copper country, they’re using the metal to fight virus – Read more

Click here for last week’s roundup.

No current risk of closures –Brazil mining association

Brazil has the capacity to meet the growing demand for iron ore and there is currently no risk of mine closure due to the covid-19 pandemic, says Brazilian mining association (Ibram) president Flávio Penido.

The second-largest exporter of the steelmaking ingredient in the world is currently only behind US in the number of active cases and has recorded 66,800 deaths.

Despite the situation, mining has not been largely disrupted in the country. With growing demand from China, Vale’s shipments surged compared with earlier in the year. According to S&PGlobal, Vale shipped an average of 18 million mt/month over January-May.

“There should be an accommodation of the price in 2021 and from 2022 the trend is down”

Brazilian mining association president, Flávio Penido

“We have a production capacity that is being restored and that allows us to meet demand,” Penido told MINING.COM.

“Companies in Brazil have adopted strict measures to reduce infections, implementing the use of masks, reducing the number of workers on-site, cleaning facilities and testing of 100% of workers,” he said.

Penido said a second wave of covid-19 still could hurt demand, especially if it occurs in China. Brazilian exports have also been benefited by the devaluation of the Real in 2020 ($1 = 5.35 Reais).

“We don’t know for how long this exchange rate will stay. We have to be cautious. How Brazil will end up after the pandemic is still uncertain,” Penido said.

Brazil’s annual iron ore production fell from 450 million tonnes in 2018 to 410 million tonnes in 2019, impacted by the disaster with the Brumadinho tailings dam.

The country’s exports of iron ore and concentrates reached $9,4 billion in H1 2020, down 3.7% compared to H1 2019.

Before the pandemic, Ibram estimated production of 450 million tonnes in 2020. Now, the association estimates output between 400 million and 420 million tonnes.

Strong futures, supply concerns

Strong steel futures and supply concerns lifted iron ore higher on Wednesday, with the 65% Fe – Brazilian Index up 1.2% at $116.20 a tonne, according to Fastmarkets MB.

“There was a price recovery and China’s construction sector is pulling demand. We have to remember that after Brumadinho, Vale took 90 million tonnes out of the market, which increased the price,” said Penido.

“This volume is coming back and will push prices below 100 dollars. There should be an accommodation of the price in 2021 and from 2022 the trend is down.”

Ibram is holding a virtual symposium next week with business roundtables, technical lectures and lives as part of its strategy to promote the Brazilian mining sector during the pandemic.

The E-mineração will be held on July 15th and 16th and it’s sponsored by AngloGold Ashanti and Kinross.

Gold price builds base above $1,800 with record in sight

Gold held above $1,800 on Thursday after reaching that threshold for the first time since 2011 in the previous session, as concerns about the global economy linger on to fuel gains for safe-haven assets.

Spot gold prices surged over 40% over the last 14 months and are within distance of 2011’s record high of $1,920.30 an ounce. While spot gold declined 0.4% by 12:15 p.m. EDT, it has held support above $1,800 per ounce for most of Thursday’s session.

Gold futures for August delivery were also down 0.7% on the Comex in New York, but still trading above $1,800 an ounce.

Demand for havens has surged so far this year, with inflows into gold-backed exchange-traded funds (ETFs) over a half-year period already surpassing the record full-year total set more than a decade ago.

According to data compiled by the World Gold Council, funds storing gold on behalf of investors added 734 tonnes of gold worth $39.5 billion to their stockpile during the first six months of 2020.

Analysts are expecting further gains — potentially testing record highs — as investors stock up on assets that they expect to hold value while the coronavirus continues to shake up economies.

“We’ll be challenging the $2,000 level by the end of the year,” Ross Norman, an independent analyst, told Reuters. “We are in a bull market for gold.”

Warren Patterson, head of commodities strategy at ING Groep NV in Singapore told Bloomberg that it seems as though “it is only a matter of time” before gold tests all-time highs.

“The case for gold holding above $1,800 is pretty strong, with the weaker US dollar, surging covid-19 cases, and some Fed officials questioning the US recovery”

Warren Patterson, head of commodities strategy at ING Groep NV

Financial investors, mainly in Europe and the US, have been on an unprecedented buying spree as fears of inflation and lower bond yields made the precious metal even more attractive.

According to Bridgewater Associates’s Ray Dalio, founder of the world’s largest hedge fund:

“Investors should favor stocks and gold over bonds and cash because the latter offer a negative rate of return and central banks will print more money”

“The previous record close of $1,900 is now in plain sight and we suspect gold might even attempt $2,000 before the end of 2020 if the number of US cases does not abate,” Oversea-Chinese Banking Corp. economist Howie Lee said in a note.

(With files from Bloomberg and Reuters)

GoviEx to appeal cancellation of uranium license in Zambia

Canada’s GoviEx Uranium Inc. (TSX-V: GXU) said on Wednesday it would appeal Zambia’s decision to terminate its Chirundu mining license in the East African country.

The company acquired the permit in late 2017 from African Energy Resources, and it included the Njame and Gwabe deposits. Both assets,  GoviEx said, were subsequently included in the preliminary economic assessment (PEA) for the company’s Mutanga uranium project.

Due to the smaller scale and higher cost nature of the two deposits, they were scheduled to be mined in the later stages of the PEA and were not included in the mine plan, GoviEx said.

The Vancouver-based uranium said Njame and Gwabe’s exclusion is expected to have low to no impact on the project economics.

Unfair decision

Since acquiring the Chirundu mining permit, GoviEx said it had “ensured all statutory reports and payments” were made. It also noted it had expanded its community and social responsibility programs to cover the villages within the Chirundu licenses, including the reconstruction of a school and the commencement of an adult education program.

“We are disappointed by the decision made by the Mining Cadastre with regards the Chirundu license and do not believe this decision is fair or in the interests of our Zambian stakeholders,” chief executive Daniel Major said in the statement.

Under the Zambian Mines and Minerals Development Act of 2015, GoviEx has thirty days to appeal the government’s decision.

The news come only a day after the miner highlighted significant gold anomalies identified near its Falea uranium-copper-silver project, in Mali

The find, the company said, shows the potential extensions of the Sirabaya West and the Siribaya-Bambadinka gold trends through, and possibly intersecting within, the Falea project