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Endeavour Mining (EDV.TO, EDV.L) paid a US$0.41 half-yearly dividend, which annualises to a 5% yield. I expected to see a takeover offer by now, but I can understand the reasons for the delay.
Yesterday, the biggest gold miner Newmont (NEM) fell 7.6% to make a fresh 52-week low. Newmont is down over 25% ytd and down over 64% since its 2022 high. Back then, gold was at $1997/oz versus $2026/oz today, or practically unchanged. What's changed is the capital markets environment for cyclicals, which is partly warranted given the high debt to equity ratios sported by cyclicals.
Newmont is the biggest component of the GDX ETF with a 13.2% weighing. When it sinks, the GDX ETF takes a hit and capital flows out of all the other mining stocks that are also a part of the ETF. Given these ETFs are market cap weighted and perform no due diligence, the good gets thrown out with the bad. In normal times, value investors would swoop in to buy the bargains but these are not normal times. Value investors have been clubbed over the head by momentum and factor investors, run over by ETF flows, and are on life support even as they fight redemptions.
Barrick (GOLD) almost made a bid for First Quantum (FM.TO) and then backed off, perhaps because the astute CEO sensed deteriorating market conditions and didn't want the algos to clobber the stock. And now Newmont has admitted that acquiring Goldcorp (GG) was a mistake, taken huge impairments, and is looking to divest six of its assets.
This is not the right time for a company to put itself up for sale.
I've slightly trimmed by Endeavour position and am planning to wait it out. The stock should move up 20-30% when a deal is announced; I don't expect a higher premium. I think it's worth waiting, but with a smaller position. I'm leaving this trade open.
After trimming, Endeavour is a 6.1% position in my main account. The second biggest position has a 4.4% weighting. I had to trim it only because it was much larger sized than the others - I'm not giving up on it. Hope that clarifies.
Good Trading!
Kashyap