Gold miners flash the cash in biggest deal binge in a decade

China Gold International Resources

04/12/2019 19:09

By Jeff Lewis and Zandi Shabalala
    TORONTO/LONDON, Dec 4 (Reuters) - 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  NEM.N  and
Barrick Gold Corp  ABX.TO , 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
 XAU=  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.  urn:newsml:reuters.com:*:nL2N2630TJ
    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.  SII.TO .   
    In a flurry of deals this week, Canada's Endeavour Mining
Corp  EDV.TO  made a $1.9 billion all-stock takeover proposal
for Africa-focused Centamin Plc  CEY.L .
    A day earlier, China's Zijin Mining Group Co Ltd  601899.SS 
struck a deal to buy Continental Gold Inc  CNL.TO  for $1.3
billion in cash.  urn:newsml:reuters.com:*:nL4N28D1U1 urn:newsml:reuters.com:*:nL4N28C2LU
    In November, Kirkland Lake Gold Ltd.  KL.TO  bid C$4.3
billion for Detour Gold  DGC.TO  while Australia's Saracen
Mineral Holdings Ltd.  SAR.AX  snapped up Barrick's stake in
Super Pit gold mine in Australia.
 urn:newsml:reuters.com:*:nL4N2852VU urn:newsml:reuters.com:*:nL4N28C2R1 urn:newsml:reuters.com:*:nL5N27X11G
    "That pendulum just started swinging and it's got a lot
further to go," Grosskopf said, referring to more deals. 
    Pretium Resources Inc  PVG.TO , Pure Gold Mining Inc
 PGM.V , Roxgold Inc  ROXG.TO  and Silvercrest Metals Inc
 SIL.TO  are among possible targets, according to industry
sources.    
    Canadian miner Iamgold Corp  IMG.TO  has drawn interest from
state-backed China Gold International Resources Corp Ltd
 CGG.TO .  urn:newsml:reuters.com:*:nL2N2691KP
    Gold miners have also boosted returns to shareholders, with
Barrick, Kirkland Lake Gold and Yamana Gold hiking payouts on
the back of revenues boosted by higher gold prices. 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Paulson's gold investor group urges deals, costs purge    
 urn:newsml:reuters.com:*:nL2N2630TJ
Centamin snubs $1.9 bln bid proposal from Endeavour Mining   
 urn:newsml:reuters.com:*:nL4N28D1U1
China's Zijin Mining to buy Canada's Continental Gold for $1 bln
amid security risk     urn:newsml:reuters.com:*:nL4N28C2R1
China Gold sees Canada's Iamgold as good fit -executive   
 urn:newsml:reuters.com:*:nL2N2691KP
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Jeff Lewis in Toronto and Zandi Shabalala in
London; Editing by Lisa Shumaker)
 ((zandi.shabalala@tr.com; +44 207 542 5937;))