Two companies on opposite sides of the globe, Carcetti Capital Corp. (CARTh:TSX.V), soon to become Hemlo Mining Corp. (HMC) and Zijin Gold International Co. Ltd. (2259:HKG), transform into billion-dollar, gold-focused mining entities, at roughly the same time but in different ways. To do so, they capitalize on the robust gold market, with its record-high prices and strong sentiment.
"This is the new normal — gold and silver at levels once thought unimaginable, miners reawakening and capital flows beginning to shift," Brien Lundin wrote in the October 2 issue of Gold Newsletter.
Gold Project Acquisition
British Columbia-based Carcetti acquired the prolific, past-producing Hemlo gold complex in northern Ontario from Barrick Mining Corp. (ABX:TSX; B:NYSE) for about US$1.09 billion (US$1.09B) early last month. Carcetti was not even a mining company but rather an investment firm operating as an inactive shell company since 2023, engaged in energy exploration and development, according to Yahoo! Finance.
So this acquisition essentially creates a new Canadian gold producer, and a midtier one at that, given the size of the Hemlo project and its historical production (25,000,000 ounces of gold since 1985). On closing of the deal, slated for this quarter, Carcetti will be renamed Hemlo Mining Corp. (HMC) and likely uplist to the TSX Venture Exchange (TSX.V) from the exchange's NEX board, explained North Ontario Business. Also, Carcetti will go from being a CA$15 million (CA$15M) company to a US$1B-plus one.
For the acquisition, Carcetti assembled a financing package totaling at least US$1B in gross proceeds, so the acquisition is fully funded, according to a news release. Financing is coming from three sources. One is an up to US$400M gold stream on future Hemlo production, to be acquired by Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE), a precious metals streaming company.
The second source is a set of senior secured credit facilities totaling US$225M. Underwritten by the Bank of Nova Scotia, these are a US$200M term loan and a US$25M revolving credit facility for working capital.
The third funding source is a bought-deal private placement offering of subscription receipts, already oversubscribed and expected to yield US$415M. Wheaton agreed to participate in this, too, as did Orion Mine Finance Management LP, a large fund in the gold space.
The Hemlo acquisition "confirmed investors' appetite for seeking value propositions through new opportunities," Ventum Capital Markets analysts wrote in their October 2 Mining Sector Update.
Ex-China Assets Spinout
Like Carcetti, Zijin Gold International, headquartered in Hong Kong, is on an upward growth trajectory, too. It was spun out of Zijin Mining Group Co. Ltd. (2899:HKG), China's biggest miner, on September 30 when it started trading on the Hong Kong Stock Exchange (HKEX) after an initial public offering (IPO).
On its first trading day, the stock jumped 68%, according to Mining.com. Zijin Gold raised US$3.2B through the IPO, for a post-money market cap of US$41B.
Having taken place during a period of ongoing record gold prices, this IPO was the largest ever in the world's gold mining space, Reuters noted, and the post-money valuation was nearly three times the valuation of post-acquisition HMC. The IPO attracted big name institutional investors, including GIC Private Ltd., BlackRock Inc. and UBS Group AG, reported Finimize. Zijin Gold will join the Hang Seng Index on October 15, only two weeks after its listing, The Standard reported.
Incorporated in 2007 in Hong Kong, Zijin Gold's businesses are the exploration, mining, processing, and selling of gold. Its major products are gold bullion, gold alloy, and gold concentrate, according to the company's website. Now, the company is the international arm of Zijin Mining, and boasts eight ex-China gold projects. China Merchants Securities just assigned Zijin Gold a Strongly Recommend rating in a new research report, according to AAStocks.
Since the IPO that closed at HK$120.60 per share, Zijin Gold's share price rose another 14% to end trading on Friday, October 3, at HK$137.50.
"For mining enterprises like Zijin Gold in the upstream of the gold industry chain, a sustained high and rising gold price will drive the performance growth, as the rise in gold prices will directly boost its revenue and profits," Xinyao Wang, an analyst publishing on SmartKarma, wrote in a recent research note, Reuters reported.
Noncore Asset Divestment
While Zijin's strategic move is to expand in a favorable market and Carcetti Capital's is to create a valuable mining company with a producing asset, Barrick's sale of Hemlo is to help optimize its portfolio, focus primarily on core assets, and enhance shareholder returns. Barrick gets to divest a less profitable, non-core asset whose annual production is less than its typical project size, Investing News Network reported.
Thanks to the robust gold market, Barrick may extract significant value from this legacy asset, from both a significant sale price and the contingent payment structure based on future gold prices, according to Investor's Business Daily. Starting in January 2027, HMC is to pay Barrick a production and tiered gold price-linked cash payment structure of up to US$165M over five years.
For Carcetti, Hemlo offers enough potential and value around which to build an entire company. A recent prefeasibility study of the project shows the operation has another 14 years left in it, producing 154,000 ounces per year. At consensus gold prices, the project would generate a US$1.1B after-tax net present value (NPV) discounted at 5% and US$1.49B of LOM after-tax free cash flow.
Whereas the high gold price environment made it expensive for Carcetti to acquire Hemlo, the same allowed it to secure more favorable financing and make the deal structure feasible and more appealing to Barrick. In the future, higher gold prices would enable HMC to generate greater revenue from production, to achieve better economics tied to exploring and developing the remaining resources and to earn a higher valuation.
As illustrated through both sides of the Hemlo transaction and by Zijin's IPO, the ongoing gold bull run has created a favorable environment for raising capital, monetizing assets and ultimately creating value.
US$4,000/Oz Gold In Sight
Gold rose 50% this year, 12.5% of it in September, its recent moves "breathtaking," described Brien Lundin in the October 2 edition of Gold Newsletter. On October 6, gold surged past US$3,900 per ounce (US$3,900/oz) for the first time on Monday, driven by safe haven demand after a fall in the yen, the U.S. government shutdown, and mounting expectations of more Federal Reserve rate cuts, an October 6 Reuters article noted.
Lundin reiterated that the gold market's foundation remains strong, supported by a "global monetary pivot, surging demand from both East and West and a mining sector that is finally producing the leverage that we've long expected." Further, he noted, we are experiencing the beginning of a generational shift that will bring more record high metals prices and a total mining sector revaluation.
"If September felt dizzying, it's only because the market is recalibrating to a reality we will all soon take for granted," Lundin added.
Ventum Capital analysts reported the following trends in the gold sector: an influx of capital due to positive investor sentiment, lots of mergers and acquisitions activity, and rising mining company valuations. All indicators are pointing to continued gold price escalation. These include likely further interest rate reductions in the coming months, ongoing central bank and exchange-trade fund purchasing of physical gold, the continued dedollarization push and typical high demand from China and India in Q4.
Accordingly, Ventum increased its long-term price estimate for gold by 13% to US$3,400/oz from US$3,000/oz and labeled it conservative given the potential for a multiyear bull market ahead. Other forecasts are higher. HSBC wrote in a recent note that gold could trade above US$4,000/oz in the near term, driven by geopolitical risks, fiscal uncertainties and threats to the Fed's autonomy, reported Reuters on Oct. 3. Similarly, Goldman Sachs predicted that gold will reach US$4,000/oz by mid-2026 due to strong demand from central banks and easing by the Fed, the bank wrote in a Sept. 30 article.
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- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Barrick Mining Corp. and Wheaton Precious Metals Inc.
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