As Gold Hits New Highs, One Of My Top Picks Is Getting Bought Out…
It has been a month since a trio of high-profile bank failures stunned investors and depositors alike. As we discussed at the time, unprecedented steps have been taken to restore shaken confidence. Yet, the market remains wary.
But even in this financial storm, there is a silver lining.
You may not have noticed, but this messy ordeal has lent support to one group: precious metals. Ever since Silicon Valley Bank began dominating the news cycle, gold has been racing higher. Futures prices climbed as high as $2,043 per ounce recently, flirting with the all-time peak of $2,078 set during the early days of the pandemic.
This bounce has benefited several of our holdings over at Takeover Trader. More on that in a bit.
Gold’s Big Bounce…
According to the World Gold Council, central banks accumulated 1,136 tons of bullion in 2022 – the most in 55 years. That appetite spurred a powerful rally, at least until the Fed’s rate tightening cycle kicked into gear. The barrage of rate hikes strengthened the U.S. dollar and lifted bond yields, both of which work against precious metals. By September, gold bottomed out near the $1,600 level.
But now it’s back.
In times of economic uncertainty (bank implosions certainly qualify), traders always return to the safe haven of gold. Adding to the appeal is a growing consensus that interest rates may have peaked for now. Traders are also pricing in a growing threat of recession. Whatever the reason, gold is suddenly shining.
Prices have already jumped more than 25% in a matter of months. And many analysts feel the geopolitical stars are aligned for a run into record-high territory.
Our Gold Miner Gets A Takeover Offer…
Needless to say, that would be welcome news for Sabina Gold & Silver (TO: SBB), one of our Takeover Trader holdings.
The company is approaching the finish line on a massive advanced-stage gold deposit in the Nunavut region of Northern Canada. According to geologists, this 80-kilometer mining belt (known as the “Back River” district) contains approximately 7 million measured and indicated (M&I) ounces of gold.
The project is expected to deliver 200,000 – 300,000 ounces annually for well over a decade. And we’re talking high-grade – about 6 grams of gold per ton of ore versus a global average of 1.2. Cash extraction costs are expected to run just $534 per ounce, among the leanest in the industry.
Engineering and logistics work for the Back River site are largely complete. The project has also secured all major operating licenses and environmental permits. After 13 years of toil (Sabina took ownership in 2009), this mine is now considered “shovel-ready.”
But that’s exactly what makes junior projects so irresistible to established senior producers – somebody else has already done the legwork. Replenishing reserves is as simple as writing a check. The Back River is among the world’s largest and richest, de-risked gold projects. The more Sabina drills and explores adjacent terrain, the more gold it continues to find.
No wonder it just received (and agreed to) a generous takeover offer.
B2Gold (NYSE: BTG) has come forward with a bid of .3867 shares of BTG for each outstanding share of SBB. At the time, the transaction valued Sabina at $820 million, or $1.87 per share – a hefty premium of 45% over the stock’s weighted average price over the prior 20 days.
Since the deal is tied to BTG shares — which have appreciated handsomely since the announcement – the valuation has sweetened considerably. And SBB has followed suit, closing at a multi-year peak of $2.17 yesterday.
Vancouver-based B2Gold is an established $4 billion producer with attractive sites from the Philippines to Namibia. I trust it will dutifully push ahead with the Back River, and some shareholders may wish to stay on board once the transaction closes.
But over at Takeover Trader, I explained to my premium readers that I am inclined to take this takeover win and cash out our profits.
If you missed the boat on this one, don’t worry too much. I have a feeling there will be more takeover deals among the gold miners in the months ahead.
In the meantime, I’ve found one little-known Texas company that could uncork the “mother of all oil booms”…
We’re talking about nearly a billion barrels of oil… And in the coming days, it could unleash a surge of mega-profits for in-the-know investors.