{"id":69384,"date":"2015-03-11T11:45:07","date_gmt":"2015-03-11T15:45:07","guid":{"rendered":"http:\/\/countingpips.com\/?p=69384"},"modified":"2015-03-11T11:46:55","modified_gmt":"2015-03-11T15:46:55","slug":"how-to-get-struck-by-lightning","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/03\/how-to-get-struck-by-lightning\/","title":{"rendered":"How to Get Struck by Lightning"},"content":{"rendered":"<div id=\"inves-37245856\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">March 11, 2015<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><h4>By Louis James, Chief Metals &amp; Mining Investment Strategist,\u00a0<a href=\"http:\/\/www.caseyresearch.com\/go\/uickn-2\/PIP\">caseyresearch.com<\/a><\/h4>\n<p>Two M&amp;A deals have already delivered paydays for investors in junior mining stocks this year: Goldcorp\u2019s half-billion-dollar purchase of Probe Mines in Canada, and Tahoe Resources\u2019 billion-dollar acquisition of Rio Alto Mining, a Peruvian gold producer.<iframe loading=\"lazy\" src=\"http:\/\/trk.caseyresearch.com\/f\/?content_id=1205&amp;code=PIP&amp;editorial=how-to-get-struck-by-lightning\" width=\"1\" height=\"1\" frameborder=\"0\"><\/iframe><\/p>\n<p>Now the arrival of a new, well-capitalized bidder for mining properties\u2014X2 Resources\u2014has raised prospects for more blockbuster deals like last year\u2019s $3-billion takeover of Osisko Mining by Agnico Eagle and Yamana Gold. X2\u2014a still-private UK company headed by Mick Davis, former CEO of mining giant Xstrata\u2014has <a href=\"http:\/\/www.caseyresearch.com\/go\/uid8i-2\/PIP\" target=\"_blank\">raised $5.6 billion to buy up \u201cblue chip\u201d assets<\/a> in the mining sector.<\/p>\n<p>Given Xstrata\u2019s pedigree as a base metals company, I don\u2019t expect X2 to go stalking any of our favorite gold exploration juniors\u2014or even base metals juniors, for that matter. The company is more likely to buy deposits and operations from major mining companies that are looking to simplify and focus their businesses.<\/p>\n<p>I have some guesses as to which properties will appeal the most to X2, but even if I\u2019m right, those guesses wouldn\u2019t be easy for investors to profit from. Suppose X2 lands a great deal for itself, taking a prize asset off the hands of a big mining company fighting reduced margins. That might be good news for X2, but it\u2019s not a public company you can invest in, so you\u2019re not invited to the party. For the seller, it\u2019s an unhappy fire sale, nothing for shareholders to celebrate.<\/p>\n<h3><strong>Knock-On Effects<\/strong><\/h3>\n<p>To find M&amp;A opportunity in junior mining stocks, look a little further down the road.<\/p>\n<p>There are only so many prime assets out there. Every time X2 takes one off the market, other buyers get pushed to shop further down the food chain. Some are going to reach down to the junior level\u2014especially to the handful of juniors that have in fact discovered world-class deposits.<\/p><div id=\"inves-4034923433\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>And then there\u2019s market psychology\u2026 Mr. Market sometimes acts a bit loopy, but he does show some recurring patterns.<\/p>\n<p>Last year\u2019s Osisko deal wasn\u2019t good news just for the company\u2019s shareholders, it put a strong gust of wind in the sails of junior and even mid-tier mineral exploration, development, and production companies. The thrill only lasted a few months, but it was real. With its $5.6 billion budget, X2 is promising a series of such gusts, one after another\u2026 enough to make 2015 much better sailing for the better junior mining stocks. And they\u2019re still so cheap, it won\u2019t take much to move them, even if gold spends the year bouncing along the bottom.<\/p>\n<h3><strong>Position to Catch the Bolt<\/strong><\/h3>\n<p>When a larger company buys a smaller one, it usually pays a premium over the recent stock price, in an instant delivering shareholders a bonus of 30-50%, sometimes as much as 100% or more. The sector average over the last five years is 49.5%.<\/p>\n<p>So even if the mining sector goes nowhere all year, positions in the right companies could go vertical in a day, the moment a takeover bid is announced. But to get struck by lightning, you need to be standing in the right place at the right time.<\/p>\n<p>(Watch our upcoming online event, <a href=\"http:\/\/www.caseyresearch.com\/go\/uidtj-2\/PIP\" target=\"_blank\"><strong>GOING VERTICAL<\/strong><\/a>, to find out how to best position yourself for big gains and which deep-value stocks to buy.)<\/p>\n<p>I track a set of companies with high takeover potential. You can build your own list by focusing on the same basics.<\/p>\n<ul>\n<li>Only a company with a big deposit is a serious target. A gold miner needs a multimillion-ounce deposit.<\/li>\n<\/ul>\n<ul>\n<li>It has to be politically safe. With everything in the sector on sale everywhere in the world, why bid for anything in a country that expropriates foreign mining companies?<\/li>\n<\/ul>\n<ul>\n<li>The company\u2019s deposit needs advanced feasibility work by reputable engineering firms, or drill results that are so extraordinarily consistent, there\u2019s almost no question of economic value. Big mining companies seldom bid for maybes.<\/li>\n<\/ul>\n<ul>\n<li>The deposit has to be feasible at lower metals prices. Yes, we think metals prices are headed higher over the next few years, but the majors think in terms of decades. For them, a mine is no good unless it can make money even when it\u2019s selling into a weak market.<\/li>\n<\/ul>\n<p>There will be M&amp;A activity in the mining sector this year. Mines are, by their very nature, depleting assets. Mining companies <em>must<\/em> discover more ore on their own or buy other companies\u2019 discoveries. It\u2019s either that or they literally mine themselves out of business.<\/p>\n<p>With the severe downturn in metal prices putting the squeeze on margins, the majors have all cut way back on exploration budgets\u2014on the order of 75% in some cases. So you can be sure they will be bidding for smaller companies.<\/p>\n<p>If you\u2019ve ever thought you\u2019d like to be the one ahead of the crowd, here\u2019s your chance: just focus on the very best takeover targets in the currently very cheap junior resource sector.<\/p>\n<p>Today, March 10, at 2:00 p.m. EST, eight industry experts and investment pros discuss how investors can find these stocks with \u201cvertical potential\u201d and which companies they like most for their own portfolios right now. <a href=\"http:\/\/www.caseyresearch.com\/go\/uidwk-2\/PIP\" target=\"_blank\">Register here to watch <strong>GOING VERTICAL<\/strong>\u2014it\u2019s free<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<div id=\"xvMdV95u77zU\" style=\"clear: both;\">The article <a href=\"http:\/\/www.caseyresearch.com\/go\/uidzm-2\/PIP\" rel=\"permalink\">How to Get Struck by Lightning<\/a> was originally published at <a href=\"http:\/\/www.caseyresearch.com\/go\/uickn-2\/PIP\">caseyresearch.com<\/a>.<\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n<div style=\"clear: both;\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>By Louis James, Chief Metals &amp; Mining Investment Strategist,\u00a0caseyresearch.com Two M&amp;A deals have already delivered paydays for investors in junior mining stocks this year: Goldcorp\u2019s half-billion-dollar purchase of Probe Mines in Canada, and Tahoe Resources\u2019 billion-dollar acquisition of Rio Alto Mining, a Peruvian gold producer. Now the arrival of a new, well-capitalized bidder for mining [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-69384","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/69384","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=69384"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/69384\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=69384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=69384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=69384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}