A gold take-under

Today, Northern Star Resources (NST.ASX) announced its wish to takeover Saracen Minerals (SAR.ASX).

Why don’t they call it a takeover rather than a merger?

Well, mainly because its “friendly”, hence using a “scheme of arrangement” encourages civil co-operation and it increases the likelihood of the deal completing but it does remove any possible price tension.

Anyway, putting spin to one side,

No premium was paid over the previous day’s closing price and Saracen’s board is recommending the acceptance of “nil premium bid”.

Yesterday, NST closed at $13.82. It is paying 0.3763 of its shares for 1 SAR share. This equals $5.20 per SAR share. Saracen’s closing price yesterday was $5.22.

This resembles past comments I have made suggesting that we can expect more ‘take-unders’ in terms of M&A prices paid.

Although this friendly and perhaps submissive path makes me wonder if Saracen think the business was/is fully valued?

Today’s price action in the rest of the sector is flat. In other words, ASX listed gold stocks are not being dragged higher with any M&A exuberance.

Perhaps last weeks note (link below) may add a little more ‘colour’ to the ASX gold market.

https://robzdravevski.com/2020/09/28/you-wont-lose-your-job-hedging-at-these-levels/

October 6, 2020
by Rob Zdravevski
rob@karriasset.com.au

Aussie Gold Stocks – Wait for cheaper prices

There will be a time to own Gold, but it’s NOT now.

Away from the fintech and infotech stocks, one of the hottest sectors on the Australian Stock Exchange (ASX) has been shares in gold companies.

But I see enough divergences along with my analysis which suggest “look out below” as I expect lower stock prices.

Already stocks such as Saracen Minerals (SAR:ASX) have “stealthily” declined 18% over the past month and understandably so. On May 26, 2020, the stock (then $5.60) was trading at 149% above its weekly 200 day moving average.

For those interested in owning ASX listed gold companies, perhaps consider these entry prices for these selected stocks.

SAR, currently $4.56, Buy at $3.23
EVN, currently $5.27, Buy at $4.55 and preferably $3.94
NST, currently $13.11, Buy at $11.55 and optimally $10.84
RSG, currently $1.03, Buy at $0.85, while $0.69 is a bit far-fetched but it won’t hurt placing an order.

As always, do you own work, seek advice, see my disclaimer and I haven’t taken the readers personal circumstance into account when writing this.

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