Top Gainer: Gryphon Minerals (GRY)
On a day that saw the Aussie market rebound strongly from early losses and buck the trend of Wall St’s massive losses Gryphon Minerals (GRY), a West African focussed Gold exploration company with projects in Burkina Faso and Mauritania soared 9.3%. With gold hitting record highs investors are piling back into gold stocks that had been hit over the past few weeks as stockmarkets dived. On Tuesday fellow gold miners Perseus and Oceangold also had strong gains.
Gryphon Minerals (GRY), a West African focussed Gold exploration company with projects in Burkina Faso and Mauritania is currently a favourite with brokers, and with the gold price hitting record highs it’s little wonder.
The announcement last month of “exceptional drill results” at the Banfora project in Burkina Faso obviously struck a chord investors, with the share price rallying strongly in July. According to GRY “the Project has numerous regional exploration targets with real potential for Gryphon Minerals to uncover a multi-million ounce gold district.”
Late last year GRY acquired ASX-listed Shield Mining, which gave Gryphon exposure to a number of highly prospective gold and copper projects in Mauritania. But with a depressed share price and a record gold price, GRY could now be a takeover target itself.
In “Takeover Targets: Watch These Stocks For M&A Activity“, James Wilson senior resources analyst at RBS Morgans picks iron ore, copper and gold as the big three sectors for M&A activity. “The domino effect of big fish being eaten by even bigger rivals means the M&A deals are likely to increase on both frequency and magnitude,” says Wilson. Wilson says that the premium applied to gold stocks has come off by 20-25% and the sector has been brought back into buying territory. Gryphon Minerals (GRY) – now trading at a 50 per cent discount to its former highs – looks attractively positioned for acquirers, he says. What’s more, the company is only 18-24 months away from production.
Les Szancer from Alpha Broking, who has a buy on the gold miner, says that there’s a lot to like about Gryphon Minerals. The West African gold explorer recently announced a 520,000 ounce increase of its inferred resource estimate at the company’s flagship Banfora Gold Project in Burkina Faso for a total of 2 million ounces. GRY is planning about 600,000 metres of drilling in the next 12 months as part of an aggressive $30 million exploration program. Szancer says the Banfora Gold Project benefits from a shallow depth with most of the resource within 100 metres of the surface, which keeps extraction costs down. “Investors like positive news flow, particularly from explorers,” he says. “Gryphon is a company that keeps hitting targets.” However, Szancer says potential investors must pay close attention, as any good news tends to be rapidly factored into the share price. “In actual fact, buying now is buying on potentially more good news,” he says. “I see the share price rising to around $3 in the next 18 months.”
According to Credit Suisse, the gold miner is looking like a good growth bet and with no less than seven brokers lining up to place a buy on Gryphon Minerals, there are plenty of other analysts bullish on GRY’s prospects. You can download research reports from Deutsche Bank, RBC, Argonaut and Eagle Research here. Eagle Research has a $2.20 target price and RBC has a $2.30 target price.
Based on Thomson Reuters data, five analysts have a buy on GRY, three have an outperform and three have a hold.
Chart: Share price over the year to 09/08/2011 versus ASX200 (XJO)
Stock code: GRY
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