Newmont Mining Corp.'s acquisition of Fronteer Gold Inc. last week has reignited merger and acquisition fever in the gold sector, and further consolidation seems inevitable as companies remain hungry to bulk up with new production and reserves.
Desjardins Securities Inc. analyst Brian Christie has three favourites that could figure in an M&A scenario: Clifton Star Resources Inc. , Grayd Resource Corp. and Orezone Gold .
Clifton Star has a joint venture with Osisko Mining on the Duparquet project in northwestern Quebec. Should exploration continue to deliver positive results, Mr. Christie sees Osisko ultimately making an offer for Clifton Star, which he currently rates as a "buy" with a $9.50 price target.
Grayd has a 100-per-cent interest in the La India project in Mexico, where a recent preliminary economic assessment showed that an open-pit deposit could support production of 90,000 ounces annually for nine years. The project's economics are enhanced by a low strip ratio and high heap leach recoveries. "We believe that La India is an excellent project for a junior producer looking to expand its platform" and Grayd could be a prime acquisition target this year, Mr. Christie said. He rates the stock as a "buy" with a $2.65 price target.
Orezone Gold is carrying out drilling at its 100 per cent owned Bombore project, where a resource update is expected in October. Management has suggested the indicated resource could increase to 3.4 million ounces from 1.5 million ounces. "Should the resource approach the company's expectations, we believe that it could become a prime acquisition candidate, especially for a company already active in West Africa," said Mr. Crhistie, who rates the stock as a "buy" with a $5.50 target price.
In other analyst actions today....
Despite increasing discussion of subsidy cuts to curb demand in markets such as Italy and Germany, the global solar industry should continue to grow robustly in the medium term and 5N Plus Inc. is well positioned as a material supplier, said Versant Partners analyst Massimo Fiore.
Upside: Mr. Fiore raised his one-year price target by $1.30 to $10 a share and maintained a "buy" recommendation.
IC Potash Corp. , which is developing a project in New Mexico in hopes of becoming one of the world's few low-cost producers of premium potash, or potassium sulphate, looks set to benefit from a resurgence in demand, said Wellington West Capital Markets Inc. analyst Robert Winslow. Prices for the specialty fertilizer have recovered to well above historical levels and are still trending up, he said.
Upside: Mr. Winslow raised his price target by 40 cents to $2.40 and sees potential for the stock to trade above $8 by 2015.
Total proven and probable gold reserves at Centerra Gold Inc.'s Kumtor mine in Kyrgyzstan have gone up by 843,000 ounces, or 11.5 per cent, and the mine life extended to 2021. A new mine plan involves the expansion of the current open pit and a delay of 12 months in accessing the planned underground operation.
Upside: TD Newcrest analyst Greg Barnes raised his price target by $2 to $22 based on a higher net asset value calculation. He maintains a "hold" recommendation.
Gildan Activewear Inc. posted strong activewear sales in its fiscal 2011 first quarter, helping revenue to easily outpace expectations, noted National Bank Financial analyst Hugues Bourgeois. But a surge in cotton prices, which Gildan has offset by increasing prices, has management cautious of some possible softening in product demand going forward, he added.
Downside: Mr. Bourgeois cut his price target by $1 to $36 (U.S.) and maintained his "outperform" recommendation.