Gold miners need to replace depleted reserves. An effective avenue for doing that is through mergers and acquisitions. The Sprott Junior Gold Miners ETF (NYSEArca: SGDJ) will be anxiously awaiting these changes.
SGDJ tracks small cap gold miners, but weighs its components based on revenue growth and price momentum. The ETF focuses on price momentum, which helps identify leading junior gold miners driven by factors like new discovery, mine development, or joint ventures.
“In a recent report, BOA analyst Michael Jalonen said his team believes the pressure to replace reserves that have been mined will be one of the big drivers for mergers and acquisitions this year. They noted that gold reserves have been falling since 2012, while gold output has remained stable,” according to FinancialNewsMedia.com.
The Pressure to Mine More Gold
As 2021 unfolds and miners seek to bolster reserves, SGDJ could be an ideal destination for those looking to play elevated levels of consolidation in the industry.
See also: Top 25 Precious Metals ETFs
“As a result, mining operations are under pressure to mine more of the precious metal. In 2020 this demand resulted in a large number of smaller mergers and acquisitions. Industry experts are predicting another round of consolidation for the industry in 2021, although they aren’t looking for mega-mergers. Instead, they expect to see a continuation of the trend in 2020 that brought a larger number of smaller deals,” according to FinancialNewsMedia.
Gold prices are faltering to start 2021, but with the dollar still weak and inflationary pressure on the horizon, investors have solid reasons to go with the yellow metal.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
