M & A Target, page-18

N
ice article in RRS today and it reads as follows:

Genesis Minerals (GMD):There’s lots of chatter that the trickle down effect of plus-$A2220 an ounce gold will wash over the junior gold developers in a big way in 2020 on the M & A front.Having said that, there was plenty of acquisition activity along those lines last year, with the bloated cash flows of existing producers being used to make bolt-on acquisitions to fully utilise established milling capacity.There is no surprise in that given the $A1,000 an ounce-plus margins to be had from running some average grade dirt through an established mill. Besides, bolt-ons take the pressure off when it comes to maintaining reserves/resources.But having said that, milling capacity is at a premium in the WA goldfields, as might be expected given the elevated gold price.The rub from that is junior developers hoping to get into production quickly through toll treatment operations might end up disappointed.It’s best then for them to continue to pursue a stand-alone development, with the fall-back being that they either secure a toll treatment deal or get taken over at a juicy premium to a current share price that reflects their dilemma.That’s kind of what faces today’s interest, Genesis Minerals (GMD). The resource estimate for its Ulysses project near Leonora was increased by 107,000 ounces in December to 867,000 ounces (8.5mt at a very handy 3.2g/t gold).The stock has edged up from 3c then to 3.5c on Thursday. It is a worthwhile gain all right but leaves Genesis well short of what might be expected of a company with a (growing) 867,000-ounce resource in the bag.More than double its current price is indicated on an EV/Resource comparison basis.Failing one of the gold producers in the region making a move on the company, the plan is to make a decision on a stand-alone development, or a toll treatment operation, in the next quarter.So things are coming to a head. And it seems likely that the starting point in the valuation matrix for the final outcome – be it stand-alone, toll treatment or takeover – could be something well north of 3.5c.