On Monday IRD published a reply to an article that was posted on Goldseek.com which theorized that capital was going to stop flowing to the junior mining stock sector because of the changes occurring at the GDXJ and JNUG ETF: No, The Junior Mining Stocks Are Not Going To Implode.
In that reply I stated that, in the course of doing research for the Mining Stock Journal, that several junior mining stock CEO’s had recently told me that there was an enormous amount of capital coming into the sector from sophisticate pools of institutional investors and strategic players (other mining companies, private equity etc).
This morning the “proof of concept” in my commentary was offered when Sandstorm Gold and Mariana Resources announced a merger deal – this update was sent out to Mining Stock Journal subscribers:
Mariana Resource / Sandstorm Merger Proposal
In the December 22, 2016 issue, I presented Mariana Resources. At the time of publication the stock was at $0.82. (click image to enlarge)
This morning Mariana and Sandstorm Gold (SAND) announced a proposed merger transaction in which Sandstorm acquires MARL in a cash and stock transaction. The value offered based on SAND’s closing price yesterday (April 25th) of $4.04 is $1.41 (MRLDF basis). Mariana shareholders would end up holding 19% of the combined entity.
Currently MRLDF is trading up 67.5% from yesterday’s close at $1.24 (C$1.70, up 67.5%). SAND is trading down 8% at $3.71 (down 33 cents), which is why MRLDF/MARL.V is trading at a discount to the proposed terms at yesterday’s closing price for SAND.
If you want to remain an owner of SAND, the Mining Stock Journal would recommend holding on to MRLDF/MARL. With the drop in SAND’s stock price, I don’t know if Mariana shareholders will be able to coerce a revised to offer in order to bring the value back up to the value as presented in the announcement of the deal. MSJ has not conducted a thorough review of SAND and therefore is not in a position to recommend owning SAND going forward. I will probably issue an opinion in the next issue of MSJ (May 4th).
For some reason the stock market hits the stock price of the acquiring company in mining stock deals that involve share issuance. This offer encompasses shares plus cash. If this were a transaction in any other sector of the market, the acquirer’s stock would be up in value this morning.
I do believe that once the price of gold and silver head higher again, the price of SAND’s stock will recover. If that’s the case, there’s an easy 12% left in MRLDF.
The Mining Stock Journal specializes in finding highly undervalued junior mining shares. It’s a bi-monthly, email-delivery based subscription service. You can find out more about subscribing using this link: Mining Stock Journal. Currently I am sending out all back issues to new subscribers.
I purchased one of Dave’s stock recommendations from the Mining Stock Journal and its up 88% over the last 30 days. Crazily, I think that stock is still early in the accumulation phase. I wouldn’t buy junior miners without the Mining Stock Journal. The juniors are just too dangerous to purchase without research, experience, and insight. I think big things are on the horizon for PMs and the right juniors are one way to leverage the move. – recent subscriber testimonial