Beaten and bruised gold-miner stocks have a prospect that a hunk of yellow never will: Mergers and acquisitions.

M&A is the reason the sector is sharply higher Monday as gold’s price ekes out a small gain. The focus is on the smaller miners, who stand a better chance of being buyout targets.

REUTERS

Goldcorp’s (GG) $2.4 billion cash-and-stock bid Monday to acquire smaller rival Osisko Mining Corp. (OSK.TO, OSKFF) could be the biggest gold-miner deal in two years. As colleague Ben Levisohn explains, the deal throws out the investor playbook of don’t spend, don’t spend, and don’t spend.

Market Vectors Gold Miners ETF (GDX), the fund for the big miners, is posting a 1.2% rise, which is more than it typically would on a day of modest gains in the price of gold.

But Market Vectors Junior Gold Miners ETF (GDXJ), representing the smaller, more speculative companies, is surging by 4.8%.

In a mid-November blog post entitled “Gold Miners: Bad Enough for a Merger Wave?,” this blog noted a prediction for much this type of deal — mid-tier miner buying smaller producer — by Cowen & Co. analysts Adam Graf and Misha Levental:

Major producers with high profile difficulties (e.g. Barrick) and newly promoted CEOs may hesitate to make acquisitions, especially of larger pre-production assets or operating assets. However, those like Goldcorp, Agnico, and Yamana, whose issues have been less severe, will have more leeway with shareholders. The largest North American producers need to continuously develop projects to offset the natural depletion inherent in the mining business. If management teams do not act to purchase advanced assets, many will likely find themselves without replacement production post 2017.