When there is a significant downturn for a sector, like the one that gold has experienced, most leading companies use the same old tried and true methods that business has used for decades: lower costs, slow down capital expenditures and most importantly consolidate. In the gold sector, there is a good chance that consolidation could be sooner rather than later.
A new research report from Cowen suggests that some of the senior miners are looking to make acquisitions now and will make the play to acquire some of the undervalued developers. The analysts at Cowen highlight two companies well positioned to acquire, and four more that could be likely targets.
There is, of course, absolutely no assurance that any of these stocks will be acquired. However, the larger companies with scale and resources could definitely take a run at them, especially the “penny stocks” as they would require less capital to purchase.
Goldcorp Inc. (NYSE: GG) is one of the miners that Cowen believes has the ability to make an acquisition to refill its longer-term project pipeline. The company operates as a gold producer involved in the exploration, development and acquisition of metal properties in Canada, the United States, Mexico and Central and South America.
Over the past years, Goldcorp has been altering its mine plans, cutting spending and disposing of assets in order to reduce costs and focus on the most profitable production. Now those efforts have begun paying off. Investors are paid a 2.2% dividend. The Thomson/First Call price target for the stock is $31.14. Shares close Tuesday at $28.18.