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DEALTALK-Eyes on Newcrest as gold dealmaking heats up

Tue 15th January, 2019 1:53am
(For more Reuters DEALTALKS, click on  DEALTALK/ )
 (Adds fund manager comments on Newcrest, paras 7-10)
    By Nichola Saminather
    TORONTO, Jan 14 (Reuters) - Two recent large M&A deals in
the gold sector have prompted speculation that Newcrest Mining
 NCM.AX , Kinross Gold Corp  K.TO  and B2Gold Corp  BTO.TO  may
be among the next gold companies to combine with a rival,
bankers and analysts said.
    On Monday, Newmont Mining  NEM.N  announced a $10 billion
takeover of Goldcorp Inc  G.TO , close on the heels of Barrick
Gold's  ABX.TO  purchase of Randgold Resources.  urn:newsml:reuters.com:*:nL3N1ZE30G
    Deal-making had largely been dormant in the gold sector in
recent years, as companies focused on cutting costs amid
investor criticism of inadequate management of capital. But the
need to bolster shrinking gold reserves to boost growth and take
advantage of rising gold prices are now providing the impetus
for consolidation.
    "There are potential benefits to consolidation and gold
miners that can generate returns above cost of capital will
likely be rewarded over time," Chris LaFemina, an equity analyst
at Jefferies, wrote in a note on Monday. 
    Gold producers who have good assets but face stagnant growth
are seeking to partner with well-run companies, according to
bankers and analysts. 
    Eyes are on Australia's Newcrest, capitalised at around 18
billion Australian dollars ($13 billion), a banker close to the
Newmont-Goldcorp deal said.
    A buyout of a North American miner could improve Newcrest's
valuation by offering a dual listing, said Andy Forster,
portfolio manager at Argo Investments in Sydney.
    "They have got some organic growth, but ... being listed out
here they are probably overlooked a little bit by North American
    Brenton Saunders, an analyst with Sydney-based fund manager
Pendal Group, said Newcrest was more likely a buyer than a
    "My sense is they want to buy something - not small, but
manageable - more of a single asset somewhere in the Americas." 
    Newcrest spokesman Chris Maitland told Reuters, "If we can
see an asset where we can ... use one of our competitive
advantages to increase the value of that asset, that's how we'd
approach M&A."
    Newcrest, which has expertise in a type of mining called
blockcaving, is vying with BHP Group  BHP.AX   BHPB.L  as major
stakeholders in Ecuador's SolGold  SOLG.L .  urn:newsml:reuters.com:*:nL8N1YN02S
    Canadian miner Kinross and AngloGold Ashanti  ANGJ.J , based
in South Africa, are among the gold producers that could combine
with other companies, analysts and bankers said. 
    "If you do a list of who has high-cost assets, those are the
guys who have to make deals," another person close to the
Newmont-Goldcorp deal said.
    Kinross did not immediately respond to a request for
comment. AngloGold Ashanti could not be reached outside business
    Kinross needs to focus on replacing depleted assets, and
would likely hone in on North America if it were to do a deal,
analysts at Scotiabank wrote in November.
    Vancouver-based B2Gold, which has operations in Africa,
South America and the Philippines, could be a target because of
its strong growth profile, said sector watchers, including PI
Financial's Chris Thompson, who has a "buy" rating on the stock.
    B2Gold did not immediately respond to a request for comment.
    The acquirer would likely be a company that has operational
expertise in the jurisdictions B2Gold operates in, particularly
West Africa, which offers the best growth prospects for the
company, Thompson said.

($1 = 1.3875 Australian dollars)

 (Reporting by Nichola Saminather; additional reporting by Clara
Denina in LONDON John Tilak in TORONTO, Harry Brumpton in NEW
YORK and Melanie Burton in MELBOURNE; Editing by Rosalba O'Brien
and Richard Pullin)
 ((Nichola.Saminather@thomsonreuters.com; +1-416-687-7604))
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