One of the most exciting parts of investing in junior gold miners is the sheer regularity that you see big gains from acquisitions – especially during a bull run.
Most of the market’s acquisitions are just totally invisible to investors, because over 90% of them involve companies with market caps under $50 million.
I’ve seen close to a dozen acquisitions of positions in just the past year alone. One just closed earlier this week when G2 Goldfields was acquired by G Mining.
In my subscriber only GPIV and GP10X portfolios, G2 ended up being a 1,091% gain – a 10X (which is the namesake of GP10X.)
The gold sector is especially primed for acquisitions for the simple reason that every actively mining gold major NEEDS to refill the hopper with some regularity, or they risk mining themselves out of business.
Remember, a productive mine is a dwindling asset that turns ore into cash – but eventually it runs out of ore.
There are only two ways to refill the hopper:
- Do your own exploration/drilling. Sometimes that works. Sometimes you can even expand your mining operations of mines that are already built and running – especially if a rising gold price makes outlier properties more economically viable.
- You buy a company that’s already done the exploration/drilling.
In the case of number 2, you have to weigh your options. Buy too many pre-production juniors too early and you risk owning low grade cow pasture. Wait too long and you end up paying through the nose for a de-risked project. Either way you can end up losing.
One of the biggest losses in gold major history almost bankrupted Barrick, and the company struggled for the better part of a decade – all because they bit off more than they could chew.
Being a gold major is not an easy business!
But in my research, I focus entirely on smaller cap companies – almost all pre-production.
I Told You So!
Last summer, I wrote: “I fully expect our holdings to keep getting acquired by larger companies.” That was August 27th. Seven months later, a major bought one of my picks and it popped 79% overnight… and eleven days after that, a second pick was taken out at a 67% premium — again, overnight. That’s not luck. It’s the kind of prediction other so-called gold analysts miss because they don’t understand gold the way I do. The acquisition phase of this gold bull market came right on schedule — and the only question left is: who’s next?
Go here to see my top three buyout targets.
It’s a cozy place to be. It means I profit when a gold major gets sloppy or desperate.
Of course, you might also be secretly hoping to see a small gold explorer fully mature on its own and capture the total gain for yourself. That can happen too.
But more often, you see your best companies acquired at a premium – typically years after you bought at a much lower price.
That’s what we’ve been seeing for the past 12+ months… the deal flow is starting to increase.
I said last August that we can expect more of these kinds of acquisitions – and I was right.
But I think we’re just getting started. One of the hallmarks of a burgeoning bull market is when deals start to accelerate. We’re not there yet, but as this market matures, expect to see more acquisitions – and more profitable acquisitions.
A strong bull market tends to goad majors into acquisition mode as they feel like they’re missing out. Don’t wait for the big players to get desperate. Get on board with my research now to own the next company that will be acquired.
I can’t tell you exactly which companies are likely to be bought out, but in my experience so far, it’s usually when my subscribers are already up 10X… Which means the next 10-bagger acquisition target likely already in my portfolio.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio