Is this ASX gold stock ripe for a takeover offer?

Newmont's takeover of Newcrest Mining is complete, but we may see more ASX gold stocks in the acquisition crosshairs.

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's been some significant takeover activity among ASX gold stocks this year.

The most prominent, of course, is the takeover of S&P/ASX 200 Index (ASX: XJO) gold share Newcrest Mining Ltd (ASX: NCM) by American gold mining giant Newmont Corporation (NYSE: NEM).

Newcrest shares had their last day of trading on the ASX last week on 26 October. Shares closed out the past 12 months up 35%.

With the gold price up 21% over the past year to US$1,984.18 per ounce, investor interest in the gold mining sector has been rekindled.

As has the potential of further takeovers.

We'll get to one particular ASX gold stock that Romano Sala Tenna, portfolio manager at Katana Asset Management, believes is ripe for a takeover in a tick.

But first…

What's happening with the gold price?

There are a lot of company-specific factors that will determine how well a gold stock performs. But the price of gold is a big one to watch.

On that front, the World Gold Council's Q3 Gold Demand Trends report revealed that quarterly global demand hit 1,147 tonnes, 8% higher than the five-year average.

Over the quarter, central banks bought 337 tonnes of the yellow metal. The 800 tonnes central banks have now bought year to date is a new record high in the World Gold Council's data series.

And the outlook for the gold price remains strong.

World Gold Council senior markets analyst Louise Street said, "Looking forward, with geopolitical tensions on the rise and an expectation for continued robust central bank buying, gold demand may surprise to the upside."

Which brings us back to…

Why this ASX gold stock could be targeted for takeover

The ASX gold stock in question is De Grey Mining Ltd (ASX: DEG).

The De Grey Mining share price has lagged the broader gold miners' rally this year, as the company is still in the project development stage.

Management is targeting first gold from the company's Hemi gold mine – located in the Pilbara in Western Australia – in H2 2026.

De Grey recently released its Hemi Definitive Feasibility Study (DFS), reporting "outstanding physical and financial metrics". It's forecasting annual production of some 530,000 ounces per year at an all-in sustaining cost (AISC) of $1,229 per ounce.

On the balance sheet, the miner held $83 million in cash with no debt as at 30 September,

Sala Tenna believes the ASX gold stock is "considerably undervalued".

Citing the Hemi's status as "the third largest undeveloped gold project globally" alongside its ideal location in the Pilbara, Sala Tenna said he couldn't envision how "it doesn't get taken out at some point".

He added that the 530,000 tonnes per annum of gold production from the DFS only factored in reserves at Hemi, noting "substantial" potential upside on the horizon from ongoing drilling and exploration.

On the takeover front, Sala Tenna said, "For cashed-up global producers, this stock must surely be the standout on all metrics."

Katana Asset Management isn't alone in its bullish outlook for this ASX gold stock.

Goldman Sachs has a buy rating on De Grey Mining, with a price target of $1.40 per share.

That represents a 23% potential upside from the current $1.14 per share.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Gold

a man wearing a gold shirt smiles widely as he is engulfed in a shower of gold confetti falling from the sky. representing a new gold discovery by ASX mining share OzAurum Resources

4 ASX 200 gold stocks delighting shareholders as gold price nears new records

ASX 200 gold stocks are making hay as the gold price toys with new all-time highs.

Read more »

A florist gets some good news on his laptop and tablet, a big smile on his face as he is surrounded by flowers.

ASX gold investors, get ready for Newmont's first dividend

ASX newcomer Newmont is about to fork out its first dividend.

Read more »

Close-up of a smiling man holding a jar containing nuggets of gold.

Guess which little-known explorer this ASX 200 gold stock is buying up

The junior ASX gold explorer has a promising pre-development project in Tanzania.

Read more »

a man wearing a gold shirt smiles widely as he is engulfed in a shower of gold confetti falling from the sky. representing a new gold discovery by ASX mining share OzAurum Resources

Why is the Northern Star share price smashing the market today?

This gold miner has been digging in all the right spots.

Read more »

A laughing woman wearing a bright yellow suit, black glasses and a black hat spins dollar bills out of her hands signifying the big dividends paid by BHP

$20,000 invested in these ASX 200 shares 10 years ago is worth how much?

Spoiler alert: You would be smiling like a Cheshire cat today.

Read more »

rising gold share price represented by a green arrow on piles of gold block

These ASX 200 gold shares are making hay amid the rising gold price

While the ASX 200 is down over the past month, leading ASX gold producers are charging higher.

Read more »

Gold bars on top of gold coins.

4 top precious metals stocks to buy on the ASX today

These stocks could be golden additions to your portfolio according to brokers.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.

Guess what 'significant milestone' sent this ASX gold stock rocketing 41% today

This gold explorer has released a promising update.

Read more »