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General Precious Metals
Gold miners flash the cash in biggest deal binge in a decade
Gold miners look set to extend a deal spree after notching transactions worth a record $30.5 billion this year, according to data, the biggest M&A binge since bullion prices peaked nearly a decade ago.
Led by top producers Newmont Goldcorp Corp and Barrick Gold Corp, miners are bulking up to replace dwindling reserves and win back investors who in recent years shunned the sector because of disappointing returns.
This year has seen 348 deals worth more than $30.5 billion, including net debt, according to Refinitiv Eikon data.
That is up from $10.8 billion last year and surpasses a previous high of $25.7 billion set in 2010, the data show. Gold topped $1,900 per ounce in 2011 and currently trades around $1,484, after hitting a six-year high in September.
The 2011 gold boom prompted buyers to overspend on acquisitions, leading to billions in impairments when prices crashed in subsequent years. This time, investors say acquirers are being more cautious.
“The reality of the market is that nobody is able to go and pay the lofty premiums that we have seen in prior cycles because their own shareholders won’t sanction it,” said Rob Crayfourd, fund manager for CQS Natural Resources Growth.
The premiums linked to recent gold transactions are far below those paid in the previous price boom, when 40% to 50% premiums were not uncommon.
Gold investor group Paulson in September urged the smaller gold miners to seek nil-premium mergers to eliminate duplication and lower costs.
Barrick paid no premium when it bought Africa’s Randgold last year while Newmont offered an 18% premium when it snapped up Goldcorp to create the world’s largest gold miner.
More deals are likely among mid-tier miners, who face pressure from activist investors to lower costs and financing constraints, said Peter Grosskopf, CEO of precious metals-focused fund manager Sprott Inc.