After a drought in mergers and acquisitions (M&A) in metals and mining, I think we’re likely to see some dealmaking in 2021 and 2022, states Ralph Aldis, portfolio manager and resources sector expert at U.S.Global Investors.

The senior mining companies have talked a good game and done a lot of bluffing in saying they don't need anybody else. But didn’t Agnico-Eagle (AEM) just blink? And now TMAC Resources (Toronto: TMR) is gone? The hunt is on.

I think the juniors that have active mining operations could be among the first assets to be considered for purchase. My whole valuation system is based on the resource statements, and often when I update my models, it’s fewer tonnes and lower grade.

You can see the resource statements deteriorating year after year at many of the established companies. Occasionally, you'll get some better numbers, but that's how you can tell if a company is doing really good research and development, if that resource statement is showing improvement year after year.

Using resource statements to value companies is more of a real options replicating portfolio approach. Similar assets trade alike.

There may be risks adjustments: for example, a mine loses its social license, or a company may trade at a premium due to management skill, but you know what the underlying asset is worth.

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One name that I think still has a lot of unrecognized value is K92 Mining Inc. (Toronto: KNT). Yes, the stock did well last year, but I can still see at least probably another 60% to 70% gain to reach fair market value based on current resources. I think K92 is going to be one of the world-class ore bodies.

Its management team is one you can trust. John Lewins, the CEO, goes to the site every month and spends weeks there. He’s not some detached guy in Vancouver living a lifestyle. I think K92 still has a lot left in it.

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