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 fell 2.86%, while the TSX Gold Index surged 11.4% and the TSX Venture Exchange, Canada’s largest junior exploration bourse, rode the gold price higher by adding 0.72% with the declining issuers edging out the advancers by a 494 to 426 margin on volume of 149.5 million shares traded.

The big board gold miners rallied with Barrick Gold (ABX) adding C$4.44 to close at C$35.31, Goldcorp (GG) gained C$3.16 to close at C$32.80, Agnico Eagle (AEM) added C$6.37 to close at C$62.99 and Yamana Gold (YRI) tacked on C$0.69 to close at C$9.99.

On the Silver front, shares of Silver Standard Resource rode the gold-silver wave by adding C$3.26 to close at C$19.56.

Investors bid up shares in International Barytex Resources (IBX) as the company recently tabled a feasibility study for its Shituru copper project in the Democratic Republic of the Congo. Barytex closed at C$0.50 for a C$0.20 gain.

The latest junior to announce a share buyback was Stealth Ventures. The company says it can buy back up to 6.5 million of its shares. That sent its share price up C$0.05 at C$0.30.

Despite the big jump in the price of gold, the junior bourse is having trouble finding any traction because investors remain fearful of any paper asset. We will see what Thursday trading has in store.

Source: Resource Stock Roundup Thursday September 18, 2008