During the last few months of 2013 a trend emerged within the mining industry, a trend that has carried on into this year: increasing consolidation in the industry as major players with strong balance sheets look to take advantage of their smaller peers' depressed valuations by buying them out at opportunistic prices. The most recent example of this is the hostile deal between Goldcorp and smaller rival Osisko Mining. With this in mind, I thought it would be interesting to have a look at the rest of the industry, and to try to pick out some mining minnows that could be attractive takeover targets; Alamos Gold (AGI 0.46%), Rio Alto Mining (NYSE: RIOM), and Asanko Gold (GAU -2.72%) look to be a good place to start.

Now, investing in a company just because it could become a target for a larger peer is not really a sustainable, long-term style of investing, as the desired takeover rarely ever happens. So, on this basis I'm not simply looking for miners that could be acquisition targets, but that also have a solid outlook. A low cost of production, strong balance sheet, and low valuation are all desirable.

Short-term pain, long-term gain
Alamos Gold is one of the more interesting gold miners on the market right now. The company has a strong balance sheet with a total of $437 million in cash and short term equivalents at the end of the fiscal third quarter, around 38% of the company's current market capitalization.

The company owns and runs the Mulatos gold mine in Mexico, one of the lowest-cost gold mines in the world. In fact, Alamos is producing at Mulatos for an all-in sustaining cost of $800 per ounce of gold produced -- that's more than $100 less per ounce than industry-leader Barrick Gold's AISC.

Unfortunately, Alamos' volume is expected to fall during 2014 by around 30,000 ounces, and the company's AISC is expect to rise to just under $1,000 per ounce. However, this slide in production volumes and rise in costs is only short term as the company transitions from open pit to underground mining for a higher quality of gold ore. Production is expected to rise back to 200,000 ounces per year during 2016.

All in all, Alamos recons that it has 6.6 million ounces of gold in reserve and nearly 36 million ounces of silver. To put this in some perspective, with gold currently trading at $1,260 per oz and silver trading at around $20 per ounce, Alamos' reserves are worth an estimated $9 billion, compared to the company's current market cap of $1.15 billion.

A great return on investment
Rio Alto is my next pick. Rio has robust balance sheet with just under $30 million in cash at the end of the fiscal third quarter, and debt only amounted to $3.4 million (though the company does have a 'gold loan,' which is to be repaid in gold produced from the company's mines).

Sadly, Rio's shares have slumped nearly 70% since the beginning of 2013 but this, in my opinion, makes the company attractive as both an acquisition target for larger peers and as a recovery play for investors. What's really attractive about Rio is its capital discipline, something not many miners can claim they have been paying attention to. Specifically, during the first nine months of 2013 Rio generated $57.3 million in cash from operations, produced 144,092 ounces of gold, and invested $61 million in capital projects and exploration.

Further, on a future earnings bases Rio looks like it will perform well during the next year or so. The company's only mine is located within Peru, and its AISC during the fiscal third quarter of last year was $808 per ounce. Gold production is estimated to be in the region of 190,000 to 210,000 ounces for 2014 indicating that cash from operations will easily top $60 million, around 20% of Rio's current market capitalization. So any potential acquirer would see a near 20% return on investment in the first year of ownership.

High risk, high reward
My final pick is a miner in the exploration stage: Asanko Mining.

Asanko is cash-rich and is developing a low-cost gold mine in West Africa. In fact, the company recently acquired a smaller peer itself and now owns two potential gold mines almost within walking distance of each other.

Even though Asanko is only a development-stage company it's still attractive for two reasons. Firstly, its flagship Esaase mine is currently full funded and initial estimates predict an AISC of production of under $900 per ounce for the mine. The company's engineers believe that, at a gold price of $1,200 to $1,300 per ounce, Esaase's IRR will be in the region of 13% to 19% once again, a lucrative investment for any would-be acquirer.

Secondly, and this is the most important part, Asanko is currently trading at a five-year low and the company's two gold projects and located within miles of Gold Fields' Tarkwa Ghanaian gold mine. Gold Fields could decide to acquire Asanko as synergies from the deal would be impressive.

Foolish takeaway
So these three small-cap miners all have good quality assets, strong balance sheets, and the promise of lucrative returns for any would-be acquirers. What's more, the quality and low production costs of these miners mean that even though they might not become takeover targets, their long-term outlooks are positive, and on their own merits they look to be great investments.