Atlantic Gold Corp (OTCMKTS: SPVEF) is flying higher having emerged as an acquisition target for Australian gold producer St. Barbara. The stock has powered through a tight trading range after a long period of consolidation.
Atlantic Gold Corp Price Analysis
The acquisition chatter comes on the heels of the Company reporting impressive financial results supported by a 2019 outlook that underscore underlying growth. The Company has also completed a strategic investment in Velocity Minerals as it continues to expand and strengthen its mining empire.
The stock flying high in the market thus does not come as a surprise in response to a flurry of positive developments. A spike to record highs essentially means the stock is a pullback play given the underlying fundamentals, which are likely to support further upside action.
After a recent spike, the $1.75 mark has emerged as a support level where pullbacks from current highs will experience strong resistance. Above the critical support level, the stock remains well positioned to continue powering high.
Conversely, a breach of the support level could elicit some sell-off that could result in the stock plunging back to the $1.50 level. In our view, Atlantic Gold remains well positioned to continue powering high as the acquisition chatter takes over.
What Does Atlantic Gold Corp Do?
Atlantic Gold bills itself as a growth-oriented gold development company. The Company is engaged in the acquisition, exploration, and development of gold properties around Canada. It currently owns a 63.2% ownership interest in the Touquoy gold project in the Beaver Dam gold Cochrane Hill.
St Barbara Acquisition Push
Shares of Atlantic Gold are flying high on the Company confirming it has entered into a definitive agreement with St Barbara. Under the terms of the deal, St Barbara is to acquire 100% of all issued and outstanding shares of Atlantic Gold at C$2.90 a share, representing a 41.1% premium.
The transaction values Atlantic Gold at C$722 million. Atlantic Gold board of directors has already approved the transaction, reiterating it is in the best interest of shareholders given the premium on offer.
Consequently, directors and officers who control as much as 32% of Atlantic shares have entered into a lock-up agreement to vote in favor of the acquisition.
“In addition to the cash consideration, Spink provides Atlantic shareholders with ongoing exposure to the Rosin Project which we believe has strong value potential. Our team has done a great job of creating value for shareholders, and we are very proud of the high-quality gold mine that we have built in Nova Scotia and St Barbara shares this view,” stated Atlantic Chairman & Chief Executive Officer, Steven Dean.
Q1 Financial Results
The acquisition chatter comes on the heels of Atlantic Gold reporting impressive financial results for the first quarter at its Moose River Consolidated Gold Mine. During the quarter, the Company produced a total of 19,612 ounces of gold.
The sale of the 19,173 ounces of gold at an average price of 1,587 resulted in net revenue of $30.4 million, up from revenues of $27.8 million generated a year earlier.
Net income for the first three months of the year totaled $5.3 million, more than double a net income of $2 million generated last year.
“The past three months demonstrated excellent execution in planned annual plant maintenance. It reinforces our commitment to deliver on our production guidance for 2019. We also expanded our reserve base at Toque and our development deposits and finalized an exciting investment opportunity in Velocity Minerals,” stated COO Maryse Belanger.
For the full year, Atlantic Gold is planning to produce 92,000 to 98,000 ounces of gold at Touquoy. The Company is also planning to focus on improving its balance sheet through debt reduction.
Atlantic Gold Corp emerging as an acquisition target in a deal that values it at C$722 million underscores market sentiments about its long-term prospects as a gold producer. The Company remains profitable if Q1 financial results are anything to go by, another indication why the stock is a solid buy. That said the stock is likely to continue powering higher ahead of the planned merger with St Barbara.
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Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.