Kinross Gold Corp.’s US$7.1-billion buyout of Red Back Mining Inc. has heightened the potential for a takeover of Osisko Mining Corp., according to UBS analyst Dan Rollins.

In the past 30 days, Osisko’s share price has risen 26%, outperforming the TSX Global Gold Index, which is up just 2%.

“Although significant strides in the construction of Canadian Malartic continue to be made, the recent run-up appears more related to M&A potential than an improvement in the underlying fundamentals (commissioning has yet to begin),” the analyst said in a note to clients.

Osisko has long been a speculated acquisition target. However, the Kinross deal and more than $1-billion of non-core asset sales by Goldcorp Inc., which owns roughly 10% of Osisko, has fueled a greater chance of a buyout.

“Given its low-cost production profile; well funded balance sheet; exploration upside; and lower geo-political risk, we believe Osisko could be a good fit for a larger gold producer,” Mr. Rollins said.

This prompted the analyst to boost his price target on the top pick-rated stock to $16 from $14, increasing his target multiple to 1.25x, inline with what is implied by the Kinross/Red Back deal. Even without M&A, he believes Osisko could re-rate to a multiple of 1.25x over the next 12-months as the Canadian Malartic gold deposit in Quebec de-risked.

“Given the inherent near-term re-rating potential, we are confident with the application of a higher multiple even if a takeover does not occur,” Mr. Rollins said.

Jonathan Ratner