Open season on African gold miners following Centamin offer, broker predicts
AngloGold’s bid for Centamin has underlined the value in Africa-focused gold miners says broker Panmure Liberum, which predicts more M&A activity in the sector “AngloGold’s offer for Centamin is just the latest in a global trend that we expect to continue for the foreseeable future,” said the broker.
“We regard Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL), Pan African Resources PLC (AIM:PAF, OTCQX:PAFRY, JSE:PAN, OTCQX:PAFRF) and Resolute Mining Ltd (ASX:RSG, LSE:RSG) as potential targets. “In particular, we believe that Caledonia could prove attractive to mid-tier companies (especially those from China, Turkey and Morocco), due to the potential scale of its contiguous Bilboes-Motapa projects (amongst other things).”
As a result of the AngloGold bid and the current record high for the gold price, Panmure Liberum has upgraded its rating of the African gold sector to buy from hold. “Our expectation is that sector momentum should continue or even accelerate into the winter, given an abundance of potential bullish catalysts that could prove material: further Fed rate cuts; China’s gold buying; intensifications of the situations in Ukraine and the Middle East; and US election uncertainty.”
By miner specifically, the broker has 'buy' ratings on Caledonia Mining, Endeavour Mining and Centamin. Caledonia (Buy, target price 1569p up from 1312p) is still some way off its 2023 high even after a recovery recently, it said.
“Continued robust performance at the Blanket mine, positive developments in relation to construction debt funding for the potentially transformative Bilboes project and exploration results at Blanket and Motapa represent potential catalysts that should help lift the shares. “Otherwise, Caledonia could end up a bid target, we believe.”
FTSE 100 member Endeavour is also a buy, (TP 2,414p from 1,914p)’ “Endeavour appears to us to be well set up for the winter. Commercial production has been declared at the Sabodala-Massawa expansion and Lafigue projects, several issues have been resolved and a Pre-Feasibility Study (PFS) on the exciting Tanda-Iguela project should be released later this year.”
Centamin is a 'buy' (TP 163p) because of the possibility of a competing bid. Panmure Liberum regards AngloGold’s 163p offer as a decent premium to underlying value but it only includes 9.6p cash.
“Any competing bid will likely sweeten the cash component rather than offering significantly more, we believe”.
Source: https://www.proactiveinvestors.co.uk/