When a gold bull market heats up, the M&A market in the mining sector tends to follow.
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It stands to reason: Mid-tier and major gold mining companies must keep their portfolios stocked with projects that can add to their reserves and production profiles.
Higher gold prices make producers flush with cash, money that they then use to acquire projects (and even whole companies) to keep their pipelines full.
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They’re often willing to pay a considerable premium — sometimes multiples — over the trading price of the company with the asset or assets they want to acquire.
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Hence, a buyout from a mid-tier or major is often the most preferred outcome for investors betting on junior explorers and developers.
With this thought in mind, Benchmark Metals (BNCH.V; BNCHF.OTC) has secured the Lawyers project within British Columbia’s Golden Horseshoe.
And, as you’re about to see, Benchmark has a clear path to outline a multi-million-ounce deposit at Lawyers, one that’s open-pittable and in a safe mining jurisdiction with good infrastructure.
In short, it checks all the boxes for a potential take-over project that would deliver a windfall.
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A Team That Knows How To Create Value
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When you’re looking for companies with potential takeout stories to bet on, you’re best served by choosing outfits run by teams with a strong track record of success.
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That certainly describes Benchmark’s leadership to a tee. Both CEO and Chairman John Williamson and President and Director Jim Greig have successful exits on their resumes — take-overs that delivered jackpot returns for their shareholders.
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A highlight of Williamson’s career was being part of the team that helped Kaminak Gold outline a multi-million-ounce gold resource in the Yukon…and then sell the entire company to Goldcorp in 2016 for C$520 million!
Greig, meanwhile, was on the team that sold Cayden Resource to Agnico-Eagle in 2014 for C$204 million.
He also helped Keegan Resources grow its Esaase project in Ghana from a new discovery into a five-million-ounce deposit. (At the height of its success in 2012, Keegan had a market cap of more than C$700 million.)
Williamson and Greig see similar potential to turn Lawyers into the kind of asset some willing producer will almost have to buy, at valuations substantially above BNCH’s current market cap.
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A Multi-Million-Ounce Gold-Silver project in the market
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Benchmark acquired Lawyers in 2018. Located in northern British Columbia within the province’s “Golden Horseshoe,” Lawyers was the site of previous high-grade underground mining.
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| Benchmark’s Lawyers project lies along British Columbia’s Golden Horseshoe, which includes some of Canada’s largest and richest metals deposits. |
That historic production totaled 171,000 oz. gold and 3.7 million oz. silver. However, it left the project’s lower-grade, open-pittable potential largely untapped.
That oversight has given Benchmark the opportunity to outline a near-surface, multi-million-ounce resource at Lawyers.
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And a massive, 100,000-meter drill program to do exactly that is currently underway.
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Case in point: just as this report was going to press, BNCH announced a batch of drill-hole assays from Lawyers that included 128.1 metres of 3.02 g/t gold-equivalent.
Along with other holes from this batch, this long interval of mineable-grade gold has helped expand the project’s Cliff Creek zone a mineralized area to 1.2 kilometers along strike, 200 meters in width and a vertical depth of 550 meters.
So successful has BNCH’s program been to date, that a recent research profile of the company by Sprott forecasts a 2.4-million-ounce gold resource when Benchmark releases its maiden estimate for Lawyers early next year.
Plus, the exploration targets outlined on the project suggest that the upside potential is even greater — with the scope to as much as double even that resource down the road.
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Cashed Up With A Clear Path To Production
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The upcoming resource estimate provides a key piece of news flow in the new year that could by itself prompt significant price re-rating for BNCH.
Having a large, near-surface, open-pittable resource (with good infrastructure access) made for a compelling story when BNCH tapped the equity market this summer.
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The company had one of the sector’s larger raises, pulling in C$50 million — and from some very smart investors. That’s more than enough money to fund its aggressive drilling program and move the project toward feasibility by 2022.
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If the company didn’t raise another dime for the next three years, it could do all the work it needs to do on Lawyers without having to dilute shareholders with a new raise.
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The Market Provides An Opening
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Of course, if Benchmark establishes a maiden resource on the order of two million ounces next year, the M&A chatter could begin in earnest.
The company raced ahead earlier this year on the strength of its story at Lawyers and the ebullience of the gold market.
A stock that began trading around C$0.18 in 2018 hit C$1.60 this summer (a near nine-fold gain).
It’s obvious that Benchmark is one of the hottest exploration stories in the market right now.
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But now consider this: Weakness in the gold market while we get through the election has created an opening for new investors.
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With gold beginning its rebound at this very moment, seemingly destined to reach new highs in the weeks and months ahead…and with the first, eagerly-awaited resource estimate on the way from Lawyers…current trading levels should put Benchmark high on list of options for investors looking to capitalize on this powerful trend.
Between its short-term catalysts and its long-term takeout potential, Benchmark Metals is providing a sterling entry point for new investors.
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