The price of gold has surged from US$2,083 an ounce at the beginning of March, 2024, to US$3,356 as of Friday.DAVID GRAY/Getty Images
Analysts and mineral company CEOs foresee a season of takeovers in response to record-high gold and silver prices that have swelled revenue streams for large precious metal companies.
After rising slowly since the pandemic, the price of gold has skyrocketed over the past year, climbing about 62 per cent from around US$2,083 an ounce at the beginning of March, 2024, to US$3,356 as of Friday. A survey of global central banks found that most believe central bank gold reserves will increase over the next year.
Dan Barnholden, the CEO of Vancouver-based Luca Mining Corp., said gold has long been a “safe haven” asset. Given the decline in the U.S. dollar and the tensions in the market because of wars in Ukraine and the Middle East, investors are shifting their investments from greenback-denominated securities such as Treasury bills into gold.
“Overall, you would expect companies to be generating more cash, maybe, than they ever have, and so you have companies trading at record prices, record multiples, on record margins‚” Mr. Barnholden said.
Luca Mining’s share price has risen from 58 cents at the beginning of 2025 to $1.72 as of Friday.
With excess profits, companies can focus on buying back their own shares or replacing their production, Mr. Barnholden said, by buying other companies.
Scotiabank analysts suggested in a research report released in early June that, with the “prospect of flat production, fewer multi-million-ounce discoveries” and the need to expand into more markets, now is the time for more mergers and acquisitions, especially in Canada, the U.S. and Australia.
“With developers currently trading at depressed valuations and with potential to face the prospect of highly dilutive financing options, this juncture appears particularly advantageous for potential acquirers,” the report said.
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On top of that, the analysts said they expected that the strong start to this year for mergers and acquisitions would continue throughout 2025.
Probe Gold Inc., a precious metals exploration company based in Toronto, and Vancouver-based Thesis Gold Inc. topped their list of potential targets that “could benefit from a positive valuation re-rate,” the report said.
Both had some of the lowest price-to-net asset value multiples, the note said. P/NAV is a way to measure a company’s market value versus the value of its assets.
In the past two months, several Canadian precious metals companies have found themselves involved in takeovers.
Most recently, Denver-based Royal Gold Inc. announced a US$3.5-billion, all-share bid for Sandstorm Gold Ltd, headquartered in Vancouver. In mid-June, Toronto-based Dundee Precious Metals Inc. acquired Adriatic Metals PLC for an implied equity value of about US$1.3-billion, giving it access to the U.K.-based company’s silver, lead, zinc and gold mine. Before that, Vancouver-based Lumina Gold Corp. was acquired by CMOC Singapore Pte. Ltd.
Like gold, the price of silver has also been spurred to a peak. Since a low in September, 2022, the spot price of silver has risen over 110 per cent, from US$18.04 an ounce to US$38.42 as of Friday.
The jump in price has given a boost to Toronto’s Excellon Resources Inc., which recently closed one of a pair of deals that allow it to reactivate the Mallay Silver Mine in Peru. Silver pricing was not the reason behind the deals, said president and CEO Shawn Howarth, but it is a benefit.
Mr. Howarth said the company’s decision to buy considered whether the operation could be profitable under the metals price at the time.
The Mallay Silver Mine has been dormant since 2018 because of the low price of the metal, which was US$16 an ounce at the time, according to Excellon. Mr. Howarth expects the mine can be restarted in about six to nine months.
“Which is fantastic when you see metals prices where they’re going,” he said.
But not all crystal balls are showing higher-than-average consolidation in the precious metals sector.
Nawojka Wachowiak, a veteran portfolio manager for the Ninepoint Gold and Precious Minerals Fund, is hesitant to forecast a surge in mergers and acquisitions, despite the “fantastic year” for gold and gold equities.
While mergers and acquisitions are common in the gold sector, rising prices have historically been a harbinger for more deals, Ms. Wachowiak said. But some deals made at times of increased revenue have not always been kind to shareholders, she said, and the sector has appeared to be more conservative in making purchases.
“My hope is that the transactions will be geared around the portfolio needs and the portfolio optimization and bettering the businesses,” she said.
Ms. Wachowiak said the sector is still trading at a discount, as company values have not followed in lockstep with surging metals prices.
“That just tells you that the generalist investors have not really embraced the sector in a meaningful way,” she said.
“So I think it would be actually really tough for them to go out there and start buying things just for the sake of buying.”
While she expects more transactions in the near future, she does not foresee a “flurry” of purchases in the short term.
Instead, she’s hearing of companies using their excess revenue to return capital to investors, possibly through share buybacks.