Gold M&A Activity Continues With Allied Nevada

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On Monday I wrote an article in which I pointed out some of the mergers and acquisitions activity going on in the gold mining sector. I concluded by suggesting that investors should be on the lookout for takeover candidates amongst gold miners. My timing was excellent given the news that came out Tuesday morning that this trend is continuing.

Reuters reported that China Gold Stone Mining Development Ltd. made an offer to purchase Allied Nevada Gold (AMEX:ANV) for $7.50 per share, or $780 million. This is a substantial premium — 74 percent — to Monday’s closing price of $4.31 per share, which highlights the demand for high-quality gold mines that are selling at distressed prices.

Allied Nevada operates the Hycroft mine in Nevada. It is slated to produce 300,000 ounces of gold next year, and it has significant resources: more than 20 million ounces of gold and 900 million ounces of silver. The company’s cash-cost is just under $700 per ounce of gold produced, meaning that even with gold prices down, the mine can still be profitable.

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