The $50-B Gold Industry Deal Spree Is Extending
$GLD, $ABX, $NEM
The $50-B Gold industry deal spree is extending into its 3rd year, even as the rising bullion price makes sealing transactions and valuing mines more difficult.
Gold has regained its “shine” as investors seek havens from volatile markets and weak interest rates. While the precious Yellow metal is up about a 25% this year, the value of Mergers & Acquisitions has soared.
The average paid in 133 transactions in the 3 months to June was $640z of Gold equivalent in the ground, up from $36 in Q-1 of Y 2016, as buyers factor in better long-term price expectations, according to the data
Barrick (NYSE:ABX) the biggest producer, last week announced plans to sell its 50% share in Australia’s largest open-pit Gold mine and joint owner Newmont Mining Corp. (NYSE:NEM) has signaled it would be willing to buy the stake at the right price. The stake may fetch as much as $1-B, according to people familiar with the matter, while analyst valuations range from $400-M to about $1.5-B.
Mergers & Acquisitions and the metal’s surge this year after 3 straight annual declines will be major topics discussed by about 1,800 delegates, including executives from Newmont and AngloGold Ashanti Ltd., at the annual 3-day Diggers & Dealers mining sector forum in the Western Australian town of Kalgoorlie.
Completed and pending Gold sector deals totaled almost $9-B in 1-H, including Newmont’s $1.3-B sale of Indonesian Copper and Gold assets to a local consortium and Centerra Gold Inc.’s $1.1-B purchase of Thompson Creek Metals Co. Volumes rose in Y 2015 to $21-B, the highest annual total since Y 2011.
“The cycle has turned,” Ian Murray said in an interview in Kalgoorlie Sunday.
Perth-based Doray Minerals Ltd. is hunting globally for potential deals to add more production, Managing Director Allan Kelly told reporters in Kalgoorlie. “It’s tough to find good value in the market at the moment,” Mr. Kelly said.“Things are either very well priced, or the projects are very old and tired.”
Valuations vary on Barrick and Newmont’s Super Pit in Kalgoorlie, a giant 3.5-kilometer (2 mile) long operation at a site where metal has been produced continuously since a late 19th Century Gold Rush, not only because of price assumptions, but also on views that exploration could extend the mine’s life beyond a slated close of Y 2030.
Barrick President Kelvin Dushnisky said the company would sell assets including the Super Pit if it got a fair price. Likewise, Newmont’s Gary Goldberg said in July that it would like to acquire Barrick’s stake, if they could come to an agreement.