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Gold sector M&A to top record-breaking $30bn this year as sector seeks to win back investors

Thu Dec 05 2019


GOLD sector merger and acquisition activity totalled $30.5bn this year, the highest in more than ten years, according to Reuters citing data produced by Refinitiv Eikon.


That is up from $10.8bn last year and surpasses a previous high of $25.7bn set in 2010, the data shows. Gold topped $1,900 per ounce in 2011 and currently trades around $1,484/oz after hitting a six-year high in September.


The higher gold price spurred a number of major deals starting with the merger of Barrick Gold with Randgold Resources which became effective in January and followed by the combination of Newmont and Goldcorp. Both transactions were an attempt to lure back investors and replace dwindling gold reserves, said Reuters.


In total there have been 348 deals with the most recently mooted being the merger of Endeavour Mining with Centamin, although the latter has rejected the merger proposal. Endeavour now has 28 days in order to “put up or shut up” in terms of UK Takeover Panel regulations.


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, said Reuters.


“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,” Rob Crayfourd, fund manager for CQS Natural Resources Growth, told the newswire.


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.