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

Shares of Teck Cominco (TCK.A, TCK.B) rebounded from Monday’s drubbing. The diversified miner added C$1.30 to close at C$30.22.

Linear Gold (LRR) failed to attract buyers after reporting a 5.07 metre drill intercept running 10.2 grams gold per tonne at its El Filao project in Brzil. Linear ended the day down C$0.06 at C$1.05.

Shares of Committee Bay Resources (CBR) bounced off the mat after the company tabled a 13.59 metre drill intercept grading 23.53 grams gold per tonne at its Three Bluffs deposit in Nunavut. Committee Bay ended the day up C$0.015 at C$0.115.

Beaten down uranium player UEX Corporation (UEX) added C$0.17 to close at C$1.51 after the company reported that the Horseshoe deposit in Saskatchewan holds an indicated resource of 3.578 million tonnes grading 0.237% U308 and an inferred resource of 311,000 tonnes grading 0.208% U308.

The junior explorers showed a bit of life on Tuesday but as the financial turmoil continues to unwind, the worst may not yet be over for the resource players. We will see what Wednesday trading has in store.

Source: Resource Stock Roundup Wednesday, October 1, 2008