In the size category where Goldcorp (and their ilk) shops, there is not much on offer.
Chesapeake Gold looks like a key chess piece in the international gold asset game which, if bid for even at a multiple of its current market cap, would represent a significant and synergistic move by a major looking to plug a hole in future production goals.
With the project financing landscape so drastically altered in recent years there are less than a handful of gold projects of Metates' size that are not already in the hands of majors. Here we shall do a brief review looking at which companies might be predators:
Goldcorp - undoubtedly the most obvious suspect due to the project's size, location in Mexico (Goldcorp's comfort zone), the company holding a 9% stake in CKG and CKG's CEO Randy Reifel sitting on the Goldcorp board.
Barrick - this company is still in wound-licking mode after its Pascua Lama debacle. The problem the company has is that PL was destined to fill a gap in Barrick's future production and now cannot fulfill that task, therefore a replacement is needed. Barrick is at least in familiar territory as its Pueblo Viejo mine in the Dominican Republic is the closest comparative, geologically, to the Metates project.
Newmont - This company is much touted as a merger partner for Barrick, but in light of the troubled status of this mooted partner, such a merger would be negatively seen by the marketplace as a value-destroying. Newmont has, in recent times, sold out of its Mexican position to its partner there, Fresnillo. This company certainly has the resources, and the need to bring Metates to production. There are serious questions about the strength of its future production pipeline.
Freeport McMoran - this company is the most prominent gold/base-metal crossover stock. The company needs to balance further away from its Indonesian exposure and Mexico is a former playing field for Phelps Dodge, which was subsumed into Freeport during the last decade. The demands of being US-listed though mean investors have little tolerance for long development projects preferring plug-n-play.
Agnico Eagle-Yamana - this pair are more likely to merge with each other than with anyone else at this point in time. Certainly if they did all merge together (consolidating the ownership of Osisko) then they would be a good cashflow machine and have the balance sheet to undertake a transaction like the undertaking of Metates.
Fresnillo PLC - this London-listed miner with a Mexican control group is the world's largest producer of silver from ore (primary silver) and Mexico's second-largest gold miner. The company is very cashed up and acquisitive. Metates is in the size category that Fresnillo is used to. As a "local group" it would also potentially be able to, tactfully put, arrange things more to its advantage than a foreign-controlled group might. The company has negligible financial debt on its books and had cash on hand of $154mn at the end of its last reported FY (as at Dec 2014).
Minera Frisco - a company that flies below the radar but has made waves in the past is Carlos Slim's mining venture. It paid US750mn to acquire some AuRico assets in 2012 and money is clearly not an object to one of the wealthiest men in the world.
Conclusion
When the original PFS came out, naysayers zeroed in on the capex issue which is always a criticism that gains traction, rightly or wrongly, these days. In the company's days of "build it and they will come" thinking, the project was sized to attract elephant hunters with a $4.3bn capital spend and a 25-year mine life. As elephant hunting is out of fashion, literally and metaphorically, the company has rightly focused on "right-sizing" the project to suit the tenor of the times. The updated PFS is the result of that process and definitely more bite-sized, however still only for those in the top-tier of players.
While we can conjure with a variety of potential acquirers it is still apparent to us that Goldcorp remains in the pole position to move on Chesapeake. However the pace of takeovers should pick up now that gold has awoken from its slumbers. Big institutional shareholders will be pressuring majors on their pipelines and few of them have anything concrete they can offer over the next few years in way of added capacity. Chesapeake's Metates deposit with its new slim-line PFS is better positioned to "fit" in one of the pipelines that are lacking production of this size for later this decade.
To access the Hallgarten & Company independent research report titled "Chesapeake Gold: Updated PFS Brings Quantum Capex Reduction" - click here
To access the initial coverage by Hallgarten & Company - click here