OTTAWA — The long run-up in gold prices spurred activity in the mining sector, with hundreds of junior players raising morsels of cash from starry-eyed investors to finance their exploration activities. But as prices for the metal faltered in 2012, the easy money dried up, leading to speculation that many of these firms would start merging so they could accumulate enough cash to actually bring some of their properties closer to development.

So far, the M&A market has been fairly quiet (with a handful of exceptions, including Goldcorp Inc.’s half-hearted bid for Osisko Mining Corp.), likely because hopeful juniors and their backers are holding out in hopes that gold prices will bounce back. Two events this past week suggest the M&A climate may be about to change.

On Thursday, Barrick Gold Corp., the world’s largest gold miner, said it will use $1,100 (U.S.) an ounce to calculate its reserves of the metal – well below the current price, even after a 28 per cent decline last year. That is likely to send a jolt of reality throughout the sector.

Then, on Friday, two juniors, Tyhee Gold Corp. and Santa Fe Gold Corp., said they would merge.

Santa Fe is a real company, with revenues and an operating mine, in New Mexico. The mine was operating, that is, until November, when the company suspended mining activities, due to a combination of equipment problems and a lack of funding. Since then it has been looking for a flush partner to help restart operations.

Enter Vancouver-based Tyhee. It is an interesting company for three reasons. First, its largest investor is Montreal-based global asset manager Interinvest Corp., controlled by Montreal-based financier, gold bug and wheeler-dealer Hans Black. Second, its newest director is Richard Evans, the well-regarded former CEO of Alcan Inc. and one of the best-connected executives in the mining and metals business. Finally, its CEO, Brian Briggs, has built several gold mines.

Tyhee may be a penny stock with a lot to prove, but it has established itself as one of the juniors to watch. Santa Fe has found its partner.

There’s one catch, though: Tyhee doesn’t have the money yet. Key to Tyhee’s plans is the creation two months ago of a “special purpose vehicle” through which it plans to raise $37.5-million (U.S.) to finance the purchase of troubled gold firms that are in a position to generate “near term” cash flow. Now it needs to raise at least $20-million of its intended amount by March 15 or the Santa Fe deal falls through.

In the good old days, Tyhee probably could have raised the money without a deal in sight. Now it has a deal, and with the right financing, the company believes it can have Santa Fe properly refinanced and quickly back in production, making money – and setting up Tyhee to continue growing via acquisitions. “If we can raise the money, we have other targets in mind,” Tyhee spokesman Greg Taylor said.

The market ignored the announcement Friday in the midst of a general selloff. But if Dr. Black and the Tyhee gang can find the money to consummate the deal, it would indicate that investors see the logic in supporting industry mergers and are finding something to be excited about at the trough of the gold cycle. This could herald the start of the long-awaited consolidation of the junior gold patch.