Shares of Newmarket, which merged with Crocodile Gold Corp.
All 10 analysts who cover Newmarket have a “buy” recommendation. The analyst consensus price target over the next year is $3.03 (Canadian), which is about 23 per cent above its current price of $2.46. The stock is up about 82 per
“As far as junior producers go right now, this is our
Mr. Thompson said the increased investment from legendary investor Mr. Sprott “provides a vote of confidence” in the company’s management and future valuation.
“We consider this ‘new kid on the block’ to be
Last month, Newmarket reported an increase in reserves and resources at its flagship Fosterville mine, which could extend its production life.
BMO Nesbitt Burns analyst Brian Quast increased his target on Newmarket to $3 from $2.75 as a result.
The company has no debt and is benefiting from the weak Australian dollar, when compared with the U.S.
Risks for the stock include a strengthening Australian dollar, the high cost of production in Australia, as well as the potential of overpaying for acquisitions, which has been an issue for gold producers in recent years after the price of gold plummeted from its record above $1,900 (U.S.) in 2011.
“It’s always a little risky and generally M&A activity is not looked upon favourably unless it’s an absolute slam dunk, and there are few of those around at the moment,” Mr. Thompson said.
Newmarket chief executive officer Douglas Forster said the company is on the hunt for acquisitions in Australia and North America, to help reach its goal of becoming a mid-tier gold miner producing 400,000 to 500,000 ounces a year,
“We do see
He wouldn’t comment on whether there has been any interest in a takeover of Newmarket, but said a hostile bid would be difficult to pull off, given that nearly half of the shares are owned by management, Mr. Sprott and Luxor.
“We’ll do whatever makes sense and that maximizes shareholder value,” Mr. Forster said. “Hopefully, that means we are growing by acquisition and organically. If it means someone else is [interested in acquiring us and achieving] our goals, then obviously we would have to consider it. It doesn’t mean we would support it.”
Peter Imhof, vice-president and portfolio manager at AGF Investments Inc., said the stock is a bit too small for him to own in the AGF Canadian Growth Equity Class fund. He also cited concerns in the market about Luxor looking to unload more of its shares, although Mr.
“You always have to pay attention when he’s taking a big position in the company,” said Mr. Imhof, who used to work with Mr. Sprott at Sprott Asset Management.
Luxor has also granted Mr. Sprott a right of first refusal to buy another 16.2 million shares by the end of the year.
- Source, Globe and Mail