Gold & Copper Highs Driving Mining M&A Activity

• Gold and copper are at or near all-time highs, while silver is starting to gain momentum, signaling potential investment opportunities.
• M&A activity in the mining sector is increasing, particularly with producers acquiring developers, indicating a maturing market cycle.
• Higher gold prices are finally rewarding producers, especially those adding cash to their bottom line, with markets beginning to recognize growth potential.
• Developers with quality projects in favorable jurisdictions (North America, Finland, Sweden) are attractive acquisition targets as buyers seek projects that can be permitted and built in the current cycle.

The gold and copper markets are experiencing significant momentum, with both commodities reaching or approaching all-time highs. This price environment is creating favorable conditions for mining companies across the value chain, from major producers to developers and explorers. As noted in the recent discussion between Derek Mcpherson, Executive Chairman, and Samuel Pelaez, President & CEO of Olive Resource Capital:

"The state of the market is pretty simple: gold is at all-time highs, copper is at all-time highs depending on how you measure it... silver is perking up."

This strong commodity price environment is now beginning to impact equity valuations, particularly for producers. After a period where rising commodity prices did not necessarily translate to proportional increases in mining equities, the market appears to be recognizing the improved economics for producers. Samuel stated:

"We're starting to see that producers who are adding cash to the bottom line at this record high gold price are being rewarded for that finally." 

M&A Acceleration: From Producers to Developers

One of the most significant indicators of market cycle progression is the increasing pace of mergers and acquisitions activity. Both Derek and Samuel highlighted that the M&A trend is far from over, with numerous transactions occurring in recent months. Notable deals include Calibre-Equinox, Gold Fields' offer for Gold Road (which was rejected), Spartan being acquired by Ramelius, and Northern Star taking out De Grey.

The Australian market appears to be leading this trend. Importantly, the nature of these acquisitions is evolving from producer-to-producer transactions to producer-to-developer deals. This represents a natural progression in the mining cycle, as companies with strong balance sheets look to secure future production.

What's particularly noteworthy about recent transactions is their scale. As Samuel pointed out:

"In the case of Spartan and De Grey, the targets for both Ramelius and Northern Star, we're talking about multi-billion dollar deals. These are not 100 million to 500 million, which is typically the bracket that we are more used to." 

This escalation in deal size is resetting expectations for developer valuations.

Corporate Buyers: Cash-Rich & Looking for Growth

The duo identified numerous potential acquirers that have yet to make significant moves but possess the financial capacity to do so. Companies mentioned include Lundin Gold, Dundee Precious Metals (though they have internal growth opportunities), IAMGOLD, Barrick, and Centerra. These companies have strong balance sheets, either with sufficient cash positions or attractive stock price multiples that would facilitate acquisitions.

With gold at all-time highs, producers are experiencing improved cash flows, making it easier to justify acquisitions. As Derek noted:

"When your share price is going up as a buyer, and the seller's share price is starting to go up, that's the easiest time to actually get a deal done." 

This dynamic creates a more favorable environment for transactions as sellers don't feel undervalued while buyers can use their appreciated paper currency.

The Creation of New Mid-Tier Producers

The current market conditions are particularly advantageous for single-asset producers looking to diversify and grow into multi-asset, mid-tier companies. This transition is a classic feature of mining bull markets, where companies like Lundin Gold and Torex, which have exceptional single assets, can leverage their strong market capitalizations to acquire additional properties. As Samuel explained: 

"This is where the new mid-tier producers are created... This is an opportunity to diversify out of those jurisdictions and effectively the opportunity to become a two or three asset company." 

Companies like B2Gold followed this path in previous cycles, highlighting the potential for current single-asset producers to replicate this growth strategy.

Developer Valuations: Still Attractive Despite Price Increases

Despite the record commodity prices, many developers have not yet seen corresponding increases in their market valuations. This disconnect presents an opportunity for investors, as quality ounces in the ground remain relatively inexpensive. Derek emphasized:

"A lot of those ounces in the ground that these developers have aren't expensive. That's a key point.”

The duo noted that performance among developers has been selective, with some companies experiencing significant share price appreciation while others lag behind. This selective performance suggests that investors and potential acquirers are becoming more discerning, focusing on projects with superior economics, favorable jurisdictions, and clear paths to production.

Compass, Episode 9

Jurisdiction Matters: Western Focus and Permitting Improvements

The geopolitical landscape is increasingly influencing mining investment decisions, with a growing emphasis on secure, Western jurisdictions. The duo highlighted the concept of "resource nationalism" and the East-West divide, noting that "the location of ounces or pounds or whatever it is that you're mining matters a lot."

Recent policy developments in North America are enhancing the attractiveness of projects in these jurisdictions. Trump recently signed an executive order to make permitting easier in the US, while in Canada, "the federal government is going to get out of permitting," which could significantly accelerate project development timelines.

Finland and Sweden are also favorable jurisdictions with straightforward permitting frameworks and high productivity levels. These countries host deposits that could potentially be developed within the current commodity price cycle.

Highlighted Investment Opportunities

Troilus Gold: Scale & Jurisdiction in Quebec

Troilus Gold represents a substantial opportunity with over 13 million ounces of gold in Quebec, one of the world's premier mining jurisdictions. The project also benefits from copper credits and is located on a disturbed site, which simplifies permitting. The company recently secured a $700m debt package, demonstrating its commitment to advancing the project.

The feasibility study for Troilus was completed at significantly lower commodity prices ($1,900 gold and $3.50 copper) than current levels, suggesting that the project economics have improved dramatically. As Samuel noted:

"Both those prices are 50% higher now. I'm pretty damn sure the capex has not increased by 50% over the last 12 months."

They compared Troilus to Detour Gold, suggesting that in the hands of a major producer with a strong balance sheet, the resource could potentially grow to 20-25 million ounces 

Arizona Sonoran: Copper in a Strategic Jurisdiction

Arizona Sonoran represents a compelling copper opportunity in the United States, a jurisdiction that is increasingly focused on securing domestic supply chains for critical minerals. The project benefits from being on a disturbed site with many permits already in hand, primarily at the state level, which typically involves a less complex approval process.

The investment thesis for Arizona Sonoran is further strengthened by the involvement of major mining companies. Rio Tinto has an option to back into the project if certain technology proves successful, while Hudbay Minerals recently became a shareholder. This creates potential "deal tension" that could accelerate M&A activity, particularly following the release of the project's preliminary feasibility study.

Omai Gold Mines: Resource Growth and Supportive Jurisdiction

Omai Gold Mines, described as the duos' largest mining position, has demonstrated strong performance driven by positive drill results. The company is expected to release a resource update that should reflect significant growth based on recent drilling success.

The project benefits from being in a jurisdiction that is increasingly supportive of mining development, having recently permitted one of the world's largest offshore oil projects. As Samuel mentioned:

"Based on the government's view, this team can't get the mine built fast enough." 

Infrastructure improvements in the country are also expected to benefit mining operations. From a valuation perspective, Omai trades at a substantial discount to comparable companies that have been acquired, suggesting potential upside. The duo indicated that a preliminary assessment later in the year would incorporate underground resources, potentially revealing the full scale of the project.

Investment Strategy: Positioning Ahead of Capital Flows

The Duo emphasized the importance of positioning investments ahead of capital flows moving down the market capitalization spectrum. While producers are easier to trade in and out of when a commodity cycle turns, the greatest opportunity for appreciation often lies in developers and explorers. Derek advised,

"Now is the time to be positioning yourself in those developers and explorers that you like." 

He also noted that while some companies have already experienced share price appreciation, there are still quality names that haven't moved significantly.

They also suggested that as more corporate takeovers occur with substantial premiums, investor psychology will shift from fear to greed, further driving capital into the sector. This "fear of missing out" could accelerate as investors seek to position themselves in potential acquisition targets.

A Maturing Bull Market with Selective Opportunities

The gold and copper markets appear to be in the early stages of a bull market, with record commodity prices beginning to translate into improved equity valuations for producers. The progression of M&A activity from producer-to-producer to producer-to-developer transactions signals a maturing market cycle that should benefit quality development projects.

Investors looking to capitalize on this trend should focus on companies with assets in favorable jurisdictions, clear paths to permitting and production, and strong project economics that have improved with higher commodity prices. As capital flows down the market capitalization spectrum, the greatest appreciation potential may lie in developers and explorers that represent attractive acquisition targets for cash-rich producers seeking growth.

The combination of record commodity prices, increasing M&A activity, and improving sentiment toward mining equities suggests that the sector may be entering a period of sustained momentum, creating opportunities for investors who can identify quality assets ahead of broader market recognition.