Tasiast

Kinross Gold Corp's Tasiast mine in Mauritania, West Africa (Kinross photo)

Slowly but surely, consolidation of gold miners in West Africa is picking up again. While we are far from the days when chunks of land in Mauritania sold for more than US$7-billion, there have been two interesting deals announced in the past six weeks: B2Gold Corp.’s US$63-million offer for Volta Resources Inc., and Centamin PLC’s $39.3-million offer for Ampella Mining Ltd. Both bids are friendly and come with premiums of more than 100% for shareholders.

“It appears the long waited West African consolidation has begun,” Clarus Securities analyst Nana Sangmuah said in a note.

Given that valuations are in the dumps and junior gold companies are struggling to raise capital, Mr. Sangmuah sees a number of other potential targets. He noted Asanko Gold Inc. is trading at cash value, even though it has several positive catalysts ahead. Other cheap targets are PMI Gold Corp. and Gryphon Minerals Ltd., which both have global resources of about five million ounces, he said.

On a bigger scale, Mr. Sangmuah thinks there is huge potential for a producing company to buy Perseus Mining Ltd. and turn around its struggling Edikan mine. “The company is trading well below replacement value for the plant [at Edikan] built for $173-million, two years ago,” he said.

For investors looking to play this Africa consolidation theme, he recommends owning a basket of development companies that stand to benefit as money “flows to projects that can sustain attractive margins under [a] low gold price environment.”

>> Read more from Peter Koven of the Financial Post