Newmarket Gold Inc. ("Newmarket" or the "Company") (TSX:NMI)(OTCQX:NMKTF) and Eric Sprott are pleased to report that Mr. Sprott will purchase 16,200,000 common shares of Newmarket (the "Acquired Shares") from Luxor Capital Partners LP and affiliates ("Luxor") at a price of $2.80 per Acquired Share for total consideration of $45.4 million. Together with Mr. Sprott's prior shareholdings in Newmarket, Mr. Sprott will own 31,351,196 common shares of Newmarket representing an approximate 17.9% ownership in the Company. Luxor also granted Mr. Sprott a right of first refusal to purchase up to an additional 22,000,000 common shares of Newmarket. This right expires December 31, 2016.
Mr. Sprott has been granted all voting rights attached to the Acquired Shares effective until the closing of the purchase of the Acquired Shares. Therefore, Mr. Sprott currently exercises control or direction over 31,351,196 common shares of Newmarket, representing approximately 17.9% of the issued and outstanding shares.
Douglas Forster, President and Chief Executive Officer of Newmarket stated: "Newmarket is very pleased to have Mr. Sprott as a larger shareholder of the Company. We appreciate his continued support as we focus on creating shareholder value from our three producing gold mines in Australia including our flagship Fosterville mine that delivered record quarterly gold production of 33,138 ounces on record grade of 7.34 g/t Au in Q1, 2016."
Eric Sprott stated: "Newmarket has a strong balance sheet with approximately US$52 million in the treasury and essentially no debt. Their three gold mines achieved record consolidated production in 2015 and the trend to increasing gold grades and recoveries continues into 2016. I look forward to being a supportive shareholder and participating in the growth of the Company."
Mr. Sprott will purchase the Acquired Shares for investment purposes. Mr. Sprott has a long-term view of the investment, and he does not intend at this time to acquire additional Newmarket common shares, but may acquire additional shares either on the open market or through private acquisitions or sell the shares either on the open market or through private dispositions in the future depending on market conditions, reformulation of plans and/or other relevant factors.
Luxor continues to hold 33,890,697 common shares of Newmarket representing an approximate 19.3% ownership in the Company with Luxor's remaining shareholdings being locked-up and restricted from trading until July 10, 2016. Newmarket has approximately 175.6 million common shares issued and outstanding.
Gold bug Eric Sprott’s increased stake in Newmarket Gold Inc. has renewed interest in the junior producer, which operates three mines in Australia. Investors are now looking for the Vancouver-based miner to fulfill its promise to boost production while controlling expenses and not overpaying for acquisitions, as the price of gold sits stubbornly at about $1,200 (U.S.) an ounce.
Shares of Newmarket, which merged with Crocodile Gold Corp. in July, have risen by about 13 per cent since the company said on Monday that Mr. Sprott bought 10 million shares to boost his ownership stake to 8.7 per cent. He purchased the stock from Luxor Capital Partners LP, which is still Newmarket’s largest shareholder, now with a 28.7-per-cent stake.
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 cent so far this year.
“As far as junior producers go right now, this is our favourite in the gold space,” said Raymond James analyst Chris Thompson, who has a $3.30 target on the stock, calling the valuation “cheap” compared with its peers in the junior mining space.
Mr. Thompson said the increased investment from legendary investor Mr. Sprott “provides a vote of confidence” in the company’s management and future valuation.
Newmarket’s board includes well-known executives such as mining financier Lukas Lundin and Randall Oliphant, the executive chairman of New Gold Inc. and chairman of the World Gold Council.
“We consider this ‘new kid on the block’ to be underowned by traditional institutional resource fund managers, and to have above-average potential to qualify for addition to several precious metal indices over the next 12 months,” Beacon Securities analyst Michael Curran said in a note. His target is $3.25.
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. currency. Gold is priced in U.S. dollars, which means the company receives more Australian dollars per ounce of gold sold. Operating costs are also paid in Australian dollars, which helps to increase margins.
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, up from expected production of 205,000 to 220,000 ounces in 2016.
“We do see opportunity, that’s the good news, but we’re cautious,” said Mr. Forster, noting that management and insiders together own about 8 per cent of the company.
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. Sprott’s investment is a positive sign.
“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.
Eric Sprott announces that he holds indirectly (through his holding company, 2176423 Ontario Ltd. (2176423)) 2,000,000 common shares of Golden Cariboo Resources Ltd., representing approximately 14.4% of the outstanding common shares of Golden Cariboo.
On November 23, 2012, Mr. Sprott purchased indirectly (through 2176423) 2,000,000 units of Golden Cariboo, on a private placement basis, at $0.25 per unit for total consideration of $500,000, which represented approximately 15.3% of the then outstanding shares on a non-diluted basis and approximately 21.3% on a partially diluted basis assuming exercise of the warrants. Each unit was comprised of one common share and one half of one common share purchase warrant, each warrant entitling the holder to purchase one common share at a price of $0. 35 per share for a period of one year from the closing of the transaction. He previously held no securities of Golden Cariboo. As the warrants have expired, Mr. Sprott's current holdings are as described above.
The securities were acquired for investment purposes. Mr. Sprott has a long-term view of the investment and may acquire additional shares either on the open market or through private acquisitions or sell the shares either on the open market or through private dispositions in the future depending on market conditions, reformulation of plans and/or other relevant factors.
Rick Rule started his career in the 1970's bull market, which had a spectacular shift towards resources after a 50 year lull. He is preparing for what he believes may be the greatest shift in natural resource markets that he will witness for the rest of his career. He says that the next 5 years will be more generous for the junior resource space than most give credit for. The junior precious metals market is already up about 100% in a short period of time.
According to Rule, in 18 months to 2 years from now there will be a synchronized bull market where the precious metals run, as well as other commodities. This will not be due to demand, but because of supply destruction. That type of market is extremely volatile to the upside. Gold prices will move in terms of the US dollar which hasn't happened since 2002.
He is seeing new customers pouring into gold from across the spectrum. They are flowing into everything from the largest gold stocks, to gold specialized funds. Rule says it's a mistake not to own physical precious metals, with the market giving us so much so fast that it's getting frothy. There is also a strong retail demand for gold that has been absent to the market for the last 5 years.
Uranium is perhaps even more exciting, as everything that needs to be in place for a truly incredible bull market is there. The worldwide demand for uranium is assured because of it's electricity generation efficiency. Rick has been deploying some of his own capital into the uranium space, and feels the market won't move for another year and a half.
12 years ago, the last bull market in uranium stocks generated so much wealth, that the participants will be extremely aggressive this rise. When the price of physical uranium goes up, the benefit will be shared only by a few companies. This creates the possibility for an astronomical increase in share prices.
2016 has been exciting so far for gold investors. In the opinion of billionaire Eric Sprott, what is happening to gold and gold shares is stunning. The average gold stock is up 160% in less than 6 months, and Eric thinks gold will easily go to $2,000.
Gold, silver, and the mining shares have been the place to be ever since Eric was pushed into precious metals 16 years ago, in 2000, when gold was at $255. He was a hedge fund and equity fund manager who realized that the NASDAQ was going to crash. He wanted to protect his investors, so he got into gold stocks and opened up a hedge fund.
He has found that when most bull markets really get going, the returns are an average of 500%. In this gold bull market, $2000 gold is more like a 50% increase, so we should see it go that high at least, possibly much more!
Money deployed in the majors and mid-tiers is trickling down into the exploration companies where there has been a huge rally. One of his current strategies is to find near-development companies where a company has an interesting deposit and/or could be in production quickly. A recent example of an investment that Eric has made is called Latin American Minerals (TSX-V:LAT).
There is a concern about the negative correlation between gold stocks and general equities. Sprott thinks gold stocks will still be strong. This is because a failure- whether it is a bank, a government, COMEX, or a stock market breakdown would be incredibly positive for gold. Deflation is better for gold than inflation.
Sprott is hoping the central banks, and the commercial banks who are short on precious metals will lessen in power, so that gold and silver can do what they should have already done and go way up. The gains have been prevented many times due to market coercion by people with more power, money, and determination than the investors. Gold going over 2k in this ponzi-scheme environment is long overdue. We're going to have a long bull market.