Let’s take a closer look at the reasons why Atlantic was acquired and what this means for the ongoing consolidation in the gold mining industry.
Atlantic Had an Attractive Operational Profile
Atlantic Gold laid great stress on keeping costs under check. The company had exceeded the higher end of its production guidance last year on account of the ramp-up of the Moose River Consolidated Gold Mine in Nova Scotia, delivering more than 90,500 ounces of gold.
For 2019, Atlantic estimated production between 92,000 and 98,000 ounces of gold at cash costs between $420 and $458 an ounce. Last year, the company’s had estimated cash costs in the range of $400 and $448 an ounce. So, the fact that Atlantic was able to keep its costs under control and increase production at the same time made it an attractive buyout target.
More importantly, the company was on track to sustain its momentum over the coming years thanks to the fact that Moose River has gold resources of more than 557,000 ounces and a gold grade of 1.5 grams per ton.
As a result, St. Barbara decided to buy the Canadian gold miner even though there were concerns about getting into a new region. Reuters reports:
“The addition of Moose River to the portfolio diversifies St Barbara’s production base with a low cost producing asset in a very favourable and prospective jurisdiction,” St Barbara Chief Executive Bob Vassie said.
Looking ahead, don’t be surprised to see further deals taking place in the gold mining space as the price of the precious metal has been on the rise, making companies such as Atlantic a good bet.
More Consolidation on the Way
Gold lost 1% last week but it is still trading at $1,400 an ounce. This price level should be enough to boost further merger and acquisition activity in the industry as miners are looking to consolidate production and reduce costs to enhance profitability.
In fact, it is estimated that gold prices can break the $1,500 an ounce mark. According to Chris Weston, the head of research at Pepperstone:
“If this case plays out that we see this central bank easing to the extent that the swaps and rates markets are pricing, and I think you’d be looking at those 2011 lows at around $1,520 [an ounce] as your 12-month, 15-month price target,” Weston told Kitco News.”
So don’t be surprised to see an uptick in deal-making in the gold mining industry as the price of gold is all set to rise higher as per experts. This is why now may be a good time to take a closer look at some junior gold miners that could soar higher on a potential buyout.
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