With the recently announced deal where the world’s largest gold producer, Newmont Corporation (NYSE: NEM | TSX: NGT), agreed to take over Australia’s largest gold company, Newcrest Mining Ltd. (ASX: NCM), for about US$19.5 billion, one can’t help but wonder if gold mining merger mania is taking hold. This deal, the third-largest merger in any industry, globally, year to date, comes after last year’s big gold deal when Yamana Gold Inc. agreed to sell itself to two Canadian rivals, Agnico Eagle Mines Ltd. (TSX: AEM | NYSE: AEM) and Pan American Silver Corp. (TSX: PAAS | NYSE: PAAS), for about US$4.8 billion.

Interestingly enough, we haven’t seen Barrick Gold Corp. (TSX: ABX | NYSE: GOLD) doing any M&A of late, which is somewhat surprising given they have been one of the most active acquisitors historically, albeit with limited success. Maybe I’ve answered my own question? Regardless, there are several other gold deals that have been done in 2023, so one can be optimistic if you have the right resource in the right jurisdiction.

Plans to Restart the Past-producing Troilus Gold and Copper Mine

One company that continues to build out their resource in a great mining jurisdiction is Troilus Gold Corp. (TSX: TLG | OTCQX: CHXMF).

Troilus is an advanced-stage exploration and early-development company focused on the mineral expansion and potential mine re-start of the former gold and copper Troilus mine. Troilus holds a land position of 43,500 ha (435 km²) northeast of the Val-d’Or district, in Quebec, Canada.

From 1996 to 2010, the Troilus project operated as an open-pit mine, producing more than 2 million ounces (Moz) of gold (Au) and nearly 70,000 tonnes of copper.

According to the most recent resource update, the areas below and around the former mine pits are currently estimated to contain an Indicated Mineral Resource of 4.96 Moz AuEq (177 million tonnes (Mt) with an average grade of 0.87 g/t AuEq) and an Inferred Mineral Resource of 3.15 Moz AuEq (116.7 Mt with an average grade of 0.84 g/t AuEq), and remain open for further mineral discoveries.

FIGURE 1: Troilus Gold – Mineral Resources Estimate

New Zones Discovered Including the X22

That last sentence is key, as Troilus continues to identify new zones both near the existing mine pits as well as elsewhere on their vast property holding.

The largest focus of late has been on the shallow and high-grade panel of mineralization called the X22 zone, which was initially discovered in late 2022. The X22 zone extends from the formerly mined Z87 pit towards the Gap Zone (see graphic below).

Drill results reported May 9, 2023, have expanded this zone to have approximately a 1-kilometer strike length and continue to remain open to expansion.

FIGURE 2: The New High-Grade and Shallow X22 in Close Proximity to the Former Open Pit (Z87)

Along with expanding the overall resource base, there are several anomalous high-grade structures at X22, which is what I like to see. Highlights from the completed 7,800-metre drill campaign include:

• Hole X22-23-027: 2.72 g/t AuEq over 34 meters (m) including 10.83 g/t AuEq over 6m
• Hole X22-23-030: 19.88 g/t over 7m including 130.83 g/t AuEq over 1m
• Hole X22-23-031: 3.29 g/t AuEq over 6m within a broader intersection of 1.73 g/t AuEq over 21m
• Hole X22-23-032: 8.63 g/t AuEq over 4m including 25.11 g/t over 1m, and 0.61 g/t AuEq over 41m, with mineralization starting directly at the surface
• Hole X22-23-033: intersected high-grade mineralization directly at the surface, including 2.14 g/t AuEq over 11 m incl 6.45 g/t AuEq over 3m and 14.54 g/t AuEq over 1m
• Hole X22-23-038: 1.30 g/t AuEq over 59m including 2.38 g/t AuEq over 9m, 1.94 g/t AuEq over 7m, 2.40 g/t AuEq over 8m, and 3.04 g/t AuEq over 3m

The Company is still awaiting approximately 1,500 meters of assays from this drill program, which will be reported as they become available. Additional drilling will continue with two rigs to further infill and expand this growing body of mineralization.

Regional Joint Venture also Returns Solid Results

Elsewhere, to be specific, approximately 10 kilometers southwest of the main mineral corridor and former Troilus mine site along strike, and roughly 2 kilometers southwest of the Beyan Gold Zone exploration target, the Company announced drill results from one of its prospective regional exploration targets, Cressida. The Cressida target is under a 50/50 joint venture with Argonaut Gold Inc. (TSX: AR).

FIGURE 3: Regional Exploration Map – Includes Joint Venture Area with Argonaut Gold

A total of 6,500 meters were drilled at Cressida with a focus on expanding the known mineralized trend and validating historical drill results. The drill results increased the continuity of mineralization to 1.3 kilometers and remain open to further expansion both to the northeast and southwest, as well as at depth.

Cressida Drill Intercept Highlights:

• Hole CRS-032: 10.68 g/t Au over 7m, including 66.8 g/t Au over 1m, represents the best intercept reported to date in terms of linear grade at Cressida
• Hole CRS-006: 1.64 g/t Au over 16m, including 3.65 g/t Au over 6m, located 30 meters from the surface
• Hole CRS-011: 8.16 g/t Au over 1m within a broader interval of 1.23 g/t Au over 15m

As a result of the high grades and robust thicknesses encountered at Cressida, this has become a high-priority target as the Company prepares for the upcoming 2023 Summer regional exploration program.

Final Thoughts

With plenty of drilling opportunities ahead and completion of a Feasibility Study, including an inaugural Mineral Reserve estimate, in the half of 2023, Troilus Gold could be putting itself on the radar of any gold miners out there looking to add some resources.

Troilus Gold trades at a market cap of approximately C$130 million.

Micro-cap companies are typically defined as organizations with below $250 million market capitalization, which these days is a pretty big club. About 60% of the public company acquisitions throughout the equity market involved micro-cap companies. These acquisitions can represent an opportunity for an investment exit at substantial premiums for investors and executives alike.

Six months ago, dealmakers were optimistic about the year ahead. Global M&A had just had its best year on record, and there was no sign of the market slowing down. However, fast-forward to today, and the picture looks very different. Inflation and interest rates are rising, stock prices are falling, and the Russia-Ukraine conflict has deepened the energy crisis.

These challenges have put a sizable dent in M&A activity in 2022. Compared to the first half of 2021, deal values declined by 20% and could fall even further. Deal activity has decreased to pre-pandemic levels, and deals above $5 billion have decreased by almost 40% in the first half of 2022 compared to the last half of 2021.

Navigating this tricky time period can be difficult for small-cap space executives. Executives at small-cap companies who are being targeted for acquisition may struggle with how to move forward. With low market caps and share prices, CEOs don’t want to upset shareholders by exiting at the bottom of the market. However, cash-strapped companies may be forced to sell if they cannot raise enough capital to continue operating. Executives need to reset their strategic priorities and focus on areas where they can be successful and score a win. With careful planning and execution, deals can be successfully completed in today’s environment.

1. Public-to-Private Transactions

Executives at small-cap companies can look towards taking their companies private through private equity (PE) deals. Deals to take public companies private have increased by more than 50% in 2022 as compared to 2021.

This market trend is mainly due to the tremendous growth in PE “dry powder” – capital available for investment – reaching a record $2.3 trillion globally. With this vast pool of capital available, PE firms have been increasingly active in M&A and now account for approximately half of all M&A deal value. Small cap executives can find deals to take their companies private.

2. Long-Term Focus

In today’s rapidly changing world, it is more important than ever for leaders to take a long-term view. Short-term thinking can lead to missed opportunities and poor decisions while focusing on the long term can help create value and generate successful outcomes. This focus is especially true in mergers and acquisitions, where a downturn can present solid growth opportunities.

A PWC analysis shows that deals done during a downturn are often the most successful, so it is crucial for leaders to be bold and pursue M&A with a strong capability fit. Leaders can position themselves to create value and achieve success by taking a long-term view.

3. Embrace Inflation

Today’s small-cap executives need to be inflation-prepared. As companies face a different set of challenges in an environment where prices are increasing, it is essential to consider both present and expected future rates for economic growth when making decisions on valuation techniques or M&A strategies.

In order to approach valuations from a proper perspective, executives must understand how companies are affected by inflation and what repercussions this has for business decisions and shareholder value.

4. Talent Management

Workforce strategy should not be an afterthought in the M&A process. There is an increasing recognition that human capital issues are key in M&A deals. To get acquisition ready, executives should assess the impact of the deal on their company’s workforce. This analysis includes questions on workforce composition, compensation and benefits, and future organization design and culture.

These factors can all impact future business performance. In addition, post-deal integration plans should take into account the role of the workforce in achieving desired outcomes. By taking workforce matters into account from the outset, executives can increase the chances of a successful M&A deal.

With the right approach, small-cap executives can manage an increasingly complex business environment and potentially secure an acquisition.