Small cap resource stocks have been absolutely trashed over the last 12 months. Many companies are running out of cash as well as credit and some are closing their doors. It’s Darwinism at its’ finest. The strongest companies, those with world-class management, strong balance sheets, and access to capital will survive and prosper. Those with little cash on hand, shaky prospects, and inexperienced management will disappear.  And now is the time to take positions in the most promising leaders who are positioned to directly benefit from the ongoing financial chaos.

A merger and acquisition mania is now underway. Take a quick look at some recent announcements:

• Canadian Gold Hunter (CGH:Toronto) is taking over Sanu Gold (SNU:Toronto).
• ATW Gold (ATW:Toronto) is merging with Kinbauri Gold (KNB:Toronto).
• New Gold (NGD:US) is combining their business with Western Goldfields (WGW:AMEX).
• IMA Exploration (IMR:AMEX), Kobex Resources (KBX:Toronto) and International Barytex (IBX:Toronto) are working on a merger.
• Linear Gold (LRR:Toronto) recently acquired GLR Resources (GLR:Toronto) Goldfields Project.
• Geoinformatics Exploration (GXL:toronto) is acquiring Rimfire Minerals (RFM:Toronto).

This is just for starters. The primary point I’m making is that M & A activity is on a massive upswing. This is rapidly changing the complexion of the sector and creating fabulous opportunities for investors.

This environment is ideal for selecting and riding the best run companies as the precious metal bull market continues to unfold. The companies leading the charge in this consolidation will emerge from this process stronger than ever. There are numerous advantages for shareholders:

• A superior management team typically results.
• Synergies are created.
• Overhead costs are lowered.
• The portfolio of properties and projects are increased which improves company diversification.
• More dollars are allocated for the most promising exploration targets.
• Larger companies attract the buying power of heavyweight financial institutions.

“Super Juniors” are being created. Companies with cash are marrying companies with exceptional projects in need of funding for advancement. Producers are gaining access to more reserves. Key technologies are being shared. These are clearly win-win situations.

We have long been acquiring the companies acting as resource consolidators in my Resource Windfall Speculator advisory. They are snapping up distressed bargains across the globe. Cash and connections are tough to beat these days.

Yes, size does matter. So does staying power. Personal fortunes will be made by savvy investors who now hitch their wagons to the talented and aggressive management teams constructing companies that will grow and dominate in the coming years and decades.

There is nothing quite like owning an un-expiring lottery ticket!

Source:  M & A: Resource Style

For the tale of the tape, the TSX Exchange lost 1.22%, while the TSX Gold Index plunged 4.4% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, fell 2.84% with the declining issuers swamping the advancers by a 612 to 254 margin on volume of 119 million shares traded.

Gammon Gold (GRS) cut 12.25 grams gold over 1.2 metres at its Guadalupe y Calvo property in Mexico’s Chihuahua state. Shares of Gammon however followed the bullion price by ending the day down C$0.60 at C$9.05.

Financially troubled Geoinformatics Exploration (GXL) added C$0.005 to close at C$0.40 after reporting that the first hole of its 2008 drill program on the Whistler zone in Alaska cut 726.8 metres running 0.48 gram gold per tonne.

NovaGold (NG)and its long time shareholders must be shaking their heads about rebuffing the $16 per share takeover bid from Barrick Gold (ABX) in late 2006. Well, Barrick may get another chance only this time at a cheaper price because NovaGold announced that it was considering selling all or part of itself to unlock shareholder value. NovaGold, which closed down C$0.33 at C$6.20, holds a 50% stake in the Donlin Creek gold project in Alaska and a 50% interest in the Galore Creek copper-gold property in British Columbia.

The junior bourse has once again taken out its yearly low and is now trading some 45% off its high hit in May 2007. The next key down stop is at 1650, which is still a long way off the 890 point bottom encountered in 2002. We will see what Thursday trading has in store.

Source:  Resource Stock Roundup Thursday, September 4th, 2008