Gold Mining Bull: Top News Of The Year (2021)
Gold prices have been relatively stable throughout the year. Prices finished down 3.5%, after two consecutive years of strong gains. Meanwhile, miners have underperformed, with the gold miners index down 18.67% year-to-date (as of Dec. 29, 2021).
The miner underperformance doesn’t come as much of a surprise: miners are leveraged to the metal, and every 1% gain or loss in the metal’s value tends to lead to a 3% to 4% gain or loss in the mining shares.
However, things are looking bright for gold miners entering 2022. Gold prices are trading at $1,800/oz, well above the industry’s all-in costs average ($1,100/oz), and M&A is heating up with more than $30 billion M&A activity in 2021 (and that momentum should continue in 2022).
[Here’s gold M&A deal values from 2009-18. In 2020, deal value rose to $16.70 billion, and topped $30 billion this year. Chart from S&P Global.]
In particular, Australian gold mining companies have been making a strong push towards acquiring Canadian assets, buying gold mines at a premium. [Several of these acquisitions made my top 10 list below.]
On Oct. 18, I highlighted five potential M&A targets, and not to my surprise, one of the names mentioned was acquired less than a month later. The four other names remain strong takeover candidates.
I expect M&A activity to increase in 2022 as miners are cashed up and need to replenish depleted reserves and maintain current production levels. Years of underinvestment should also contribute to the reversal in 2022.
Senior gold miners have the lowest net debt levels in years – see Barrick Gold (NYSE:GOLD) as one example – while gold development assets are the cheapest they have been in some time, creating the perfect recipe for takeovers.
I’ve scoured gold mining newsletters, websites, and press releases to provide what I feel is the top news in the gold and silver mining sector for all of 2021. My list includes production results or earnings, exploration updates, M&A and other relevant news.
Honorable Mention Picks
Here’s a few news items that just missed making the top 10 list this year:
Hod Maden Project Approved
Mid-tier royalty & streaming company Sandstorm Gold (SAND) scored a big win in 2021 when it announced that its partner and operator of Hod Maden, Lidya Madencilik, of the Environmental Impact Assessment (“EIA”).
Initial production is targeted for 2024, and Sandstorm has estimated Hod Maden will boost its gold annual gold production by 60,000 oz per year.
Western Copper & Gold’s PEA study
The Casino project carries a post-tax value of $2.33 billion using conservative metals prices of $3.35/lb copper and $1,600/oz gold. The mine is estimated to produce 708,000 gold equivalent ounces per year over its 47-year mine life.
One major obstacle is a hefty price tag of over $3 billion. However, mining behemoth Rio Tinto (RIO) owns 7.8% of Western Copper (WRN) through its $25.6 million investment completed this year, and clearly has some interest in acquiring the massive copper-gold project.
Aya Gold & Silver’s Stunning Grades
The Morocco-focused silver producer Aya Gold & Silver (OTCPK:MYAGF) reported some of the most impressive assays in the sector this year at its Zgounder mine, including (but not limited to): 2,417 g/t silver over 14 meters; 2,887 g/t silver over 5.5 meters; and perhaps the best silver intercept of the year: . Those are high grades over impressive widths!
Recently, Aya reported a in measured and indicated silver resources to 96.1 million ounces, and it plans to complete a feasibility study for a mine & plant expansion in Q1 2022.
Equinox Gold Struggles
It was not a great year for mid-tier producer Equinox Gold (EQX), which has declined 38% year-to-date. Los Filos in Mexico was a major problem for Equinox this year with a temporary blockade impacting its production (the second blockade in less than 10 months).
With the recent , and recent groundbreaking for full-scale construction of its new Greenstone Mine in Ontario, Equinox appears to be diversifying out of Mexico.
Here are the top 10 news items for 2021:
10. An Active Year for Gold Streaming & Royalty Companies
The streaming & royalty sector continues to grow as a source of alternative financing for mining companies. Every major streamer was active this year.
- Wheaton Precious Metals (NYSE:WPM) was the most active purchaser of new assets, purchasing a gold stream on Capstone’s (OTCPK:CSFFF) Santo Domingo project for $290 million; a on Artemis’ (OTCPK:ARGTF) Blackwater project for $582 million; and a on Generation Mining’s (OTCQB:GENMF) Marathon project for $240 million.
- Royal Gold (RGLD) acquired a royalty on the Red Chris mine in British Columbia for $165 million, and a on Ero Copper’s (NYSE:ERO) NX gold mine for $100 million.
- Nomad Royalty (NYSE:NSR) closed on a $95 million gold stream on Orion’s Greenstone Gold Mines, and purchased a on Ivanhoe Mines’ (OTCQX:IVPAF) Platreef project.
- Sandstorm Gold provided a $60 million financing package (gold stream and debt financing) to Bear Creek Mining for the Mercedes gold mine acquisition; a $30 million gold stream on the Vatukoula gold mine in Fiji; and from Vale’s (NYSE:VALE) producing and exploration assets.
- EMX Royalty (EMX) purchased an in Chile for $34.1 million, and will pay up to $100 million to acquire a (SSRM).
Royalty & stream financing should continue to grow as a source of mining funds in 2022.
9. Peru Elects Pedro Castillo
In a blow to the mining sector, leftist candidate Pedro Castillo was declared the new president. Castillo has promised higher taxes and royalties on Peruvian mines, which Peru’s mining chamber has warned would in future investments at risk.
Peru-focused gold & silver stocks underperformed this year, even though not much has changed in the country. Recently, Peru’s Congress has
Other than the shutdown of the Las Bambas copper mine due to a road blockade, not much has changed in Peru.
Still, investors in Peru-focused miners will need to keep a close eye on government development in 2022, especially as Castillo has already been .
8. New Found Gold’s Major Gold Discoveries at Queensway
In 2021, New Found Gold (NYSE:NFGC) emerged as one of the most exciting gold explorers in the world, making several high-grade gold discoveries at its Queensway project in Newfoundland, including:
- 430.2 g/t gold over 5.3 meters at the Golden Joint Zone;
- 88.53 g/t gold over 3.35 meters at Keats (at approximately 300 meter vertical depth);
- 683.1 g/t gold over 2.4 meters at the Lotto Zone, 2km north of Keats.
Its early drilling success led to a 300,000 meter increase in the drill program, from 100,000 to 400,000 meters (and from 4 to 10 drill rigs, with a further expansion to 14 rigs underway).
New Found Gold has yet to test several high-priority targets along 2.6km of prospective strike along the Appleton Fault, including the Big Dave target, where grab samples returned assays up to 1,131 g/t gold. There’s also another 10+km of prospective strike along the JBP fault, which has seen limited drilling.
With 32,000 meters of core pending assay, a super-aggressive exploration program planned for 2022, and the use of the new which should speed up assaying turnaround time, and New Found Gold is a name to watch closely in 2022.
7. Fortuna Silver Mines and Roxgold Merge
Not all M&A is considered good news by the market. Case in point: Fortuna Silver Mines (FSM), which completed its merger with Roxgold on July 2 and has seen its share price decline by 58.61% year-to-date (and 41% post-merger).
On April 27, I argued that the merger doesn’t add much value to either company. I felt the deal carried no apparent synergies, meaning the combined company is no greater than the sum of their individual parts. It’s a merger of two miners located in completely different parts of the world (Mexico and Africa).
Recent (“EIA”) on Fortuna’s San Jose Mine has done little to turn things around for its stock price.
6. Newmont Acquires GT Gold, Expands B.C. Footprint
Newmont (NEM) made one of the splashiest acquisitions of the year, using its size and balance sheet strength to .
GT Gold’s Saddle North discovery is located near Newcrest’s Red Chris mine. Saddle has the size and scale that Newmont was looking for in a project, with 632 million pounds of copper and 1.46 million ounces of gold in indicated resources.
And the project is located in the mining-friendly jurisdiction of British Columbia, which ranks near the top for investment attractiveness index on the 2020 Fraser Institute Survey of Mining Companies (see its ranking below):
(Credit: Fraser Institute Mining Survey)
The GT Gold takeover was the move that set off a flurry of takeovers in the Golden Triangle District of B.C., which has become one of the hottest regions for M&A. Watch out for more M&A activity in this region in 2022; I would not be surprised to see Newmont or an Australian miner make another acquisition.
5. Newcrest to Acquire Pretium Resources
The deal was a smart move for Newcrest, adding 300,000+ ounces of annual gold production from Brucejack, which is located in the same province of its 70%-owned Red Chris mine in a tier-1 mining jurisdiction. Brucejack carries a 4.2 million ounce gold reserve and a 13-year mine life.
Brucejack is a profitable underground gold mine which provides excellent exploration upside, made evident by the fantastic at the Golden Marmot Zone, returning 72.5 g/t gold over 53.5 meters and 46.1 g/t gold over 5.8 meters (among other high-grade assays).
4. Osisko Mining’s Windfall Success, and Possible JV
Osisko Mining (OTCPK:OBNNF) was one of the most successful gold explorers in 2021, returning outstanding drill results throughout the year from its 100% owned Windfall project.
Recently, the Quebec gold explorer recapped its top 21 intercepts of the year from Windfall, from over 360,000 meters in over 900 drill holes from surface and underground. Here are some of the top holes:
|Interval [m]||Au g/t||GxM|
You’ll see that Osisko hit bonanza grades of up to nearly 4,000 g/t at Windfall, with a metal factor (gram times meter) eclipsing 9,000 in its top hole, and exceeding 1,000 in its top 14 holes.
Steady stream of bonanza-grade assays didn’t do much to move Osisko’s stock price throughout the year, until the announcement of a (OTCPK:NESRF) sent shares soaring.
Osisko should have a very active 2022, with a resource update due in Q1 2022, followed by a feasibility study and potential completion of the joint-venture arrangement with Northern Star.
3. A 3-Way Gold Royalty Company Merger
Gold Royalty Corp. (NYSE:GROY) has emerged as one of the most aggressive companies in the sector after completing a three-way merger with Abitibi Royalties and Golden Valley Mines.
The move adds a cornerstone royalty over the Canadian Malartic mine in Canada, operated by Yamana Gold (NYSE:AUY) and Agnico Eagle Mines (AEM), as well as several development and exploration royalties in Canada.
More recently, Gold Royalty Elemental Royalties (OTCQX:ELEMF), although Elemental has commented that no formal offer has been made yet and previous proposals from Gold Royalty have been declined by its board. Elemental also plans to reject any formal bid.
Gold Royalty has been one of the most active M&A participants in the gold sector this past year, after completing the three-way merger and in August.
I believe Gold Royalty’s continued aggressiveness presents an opportunity for investors to acquire smaller royalty companies which are likely M&A targets in 2022.
2. Kinross Gold to Buy Explorer Great Bear Resources
Great Bear Resources (OTCQX:GTBDF) (OTCQX:GTBAF) was one of the biggest winners of 2021, with its shares returning 70% year-to-date, capped off by the news it will be (KGC) at a 40% premium, in a deal valuing the gold explorer at C$1.8 billion.
The deal was surprising to me for a couple of reasons.
First, Great Bear’s Dixie project likely carries a large, high-grade resource, but no resource estimate has been released yet. Therefore, the project is a minimum of 3-4 years away from initial production. We just haven’t seen major or even mid-tier producers acquire early-stage explorers.
Second, Great Bear commands a valuation close to C$2 billion, which is quite high for an exploration company, so Kinross clearly believes that Dixie is a world-class project capable of producing 300,000+ozAu per year at competitive cash costs.
I listed this acquisition as more noteworthy news compared to the Pretium deal for this reason. The takeover is a big deal as I think it shows senior miners like Kinross are ready to get more aggressive with M&A, and it could lead to miners making more earlier-stage project acquisitions in 2022.
1. Agnico Eagle and Kirkland Lake Gold Join Forces
The biggest news of the year goes to Agnico Eagle (NYSE:AEM) and Kirkland Lake Gold (KL), which will merge in early 2022. The new company will carry a market cap of $23+ billion, trailing only Newmont and Barrick Gold.
Upon closing, existing Agnico Eagle and Kirkland Lake Gold shareholders will own approximately 54% and 46% of the combined company, respectively.
Some Kirkland Lake Gold investors were upset at the news, feeling Agnico got the better of the deal as Kirkland Lake is arguably a more valuable company. In particular, the Detour Lake operation has become a world-class operation, with outstanding exploration success and lower operating costs than anticipated.
But there’s no arguing that the new Agnico is going to be a gold mining powerhouse, with combined annual production of 3.4+ million gold ounces at industry-leading cash costs, and its operations mainly located in top mining jurisdictions of Canada (75%), Australia (12%) and Finland (7%).
The main benefit to the merger is the potential for enormous cost savings or “synergies,” which has been estimated at a minimum of $2 billion over 10 years.
In particular, I think the regional consolidation of the Abitibi Greenstone Belt carries the potential for significant synergies as it unifies five operating mines in this region, including the world-class Canadian Malartic mine and the Macassa mine, with additional JV properties and exploration grounds.
Shareholders have voted in favor of the merger, which is expected to be completed on or before March 31, 2022. I expect to see more mergers like this in 2022.