Seeking Less Risky Business In Mining M&A [New Gold Inc. (USA), Newmont Mining Corp, Barrick Gold Corporation (USA)]

Dalradian Resources Inc. (DNA:TSX) is developing its high-grade Curraghinalt gold project in Northern Ireland. The project has a robust PEA based on $1,200/oz gold and the company has $37M in the bank.

Then there is a junior named East Africa Metals Inc. (EAM:TSX.V). The market cap is $8M but it has $16M in working capital. The market probably expects that the money will disappear. Exploration is all about value creation through drilling and if East Africa could demonstrate that it will use the cash to drill, then it’s worth having a look at. Its main asset is in Ethiopia in East Africa. Interestingly, Qatar-backed QKR Corp. is said to be close to making a $1 billion bid for miner Nevsun Resources Ltd. (NSU:TSX; NSU:NYSE.MKT), which is operating in Eritrea just north of Ethiopia. Probably this will bring back the whole region to the mining and M&A landscape.

TGR: What words of wisdom do you have for investors in the gold space?

FS: I would still play it safe here. Look for producers that make money at these prices to protect your downside risk—as long as those companies have little chance of issuing new shares. Also, have a look at selective exploration and development stocks that have done well this year. A few stocks are up 20–60% YTD based on progress on fundamentals.

I would be reluctant to buy into any company that is high grading at these prices to survive. If companies mine their best deposit at current gold prices at small margins, those firms are basically giving away their upside when the cycle starts to turn upward. I would rather see those companies shut down and wait for better prices.

TGR: Thank you for your insights, Florian.

Florian Siegfried is head of precious metals and mining investments at AgaNola Ltd., an asset management boutique based in Switzerland. Previously Siegfried was the CEO of Precious Capital AG, a Zurich-based fund specializing in global mining investments. Prior to this Siegfried was CEO of shaPE Capital, a SIX Swiss Exchange-listed private equity company that was founded by Bank Julius Baer & Co. Siegfried holds a masters degree in finance and economics from the University of Zurich.

1) Brian Sylvester conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Asanko Gold Inc., Unigold Inc., Victoria Gold Corp., Virginia Mines Inc., Richmont Mines Ltd. and Precipitate Gold Corp. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
3) Florian Siegfried: I own, or my family owns, shares of the following companies mentioned in this interview: Alacer Gold Corp., Victoria Gold Corp. and GoldQuest Mine Corp. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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