Gold Mining Deals Seen Rebounding on Price Discount: Bloomberg

POSTED ON January 08, 2014 BY Travis McPherson
CATEGORY Asanko Gold, Companies, Copper, Finance, Gold, Mining, PMI Gold, Pretium Resources,

A worker pours gold at Newmont's Boddington mine (Photo: Newmont Mining)

According to an article by Bloomberg today, investment bankers are forecasting a rebound in gold mining M&A activity after decade low quite period for deals. Companies will be looking to acquire assets at fire-sale prices. The producers are trading at 20-year lows relative to book value, according to Bloomberg data. Total M&A transaction value in the gold sector was at $10.1 billion which hasn't been seen since 2004.

The article sites Adam Graf from Cowen & Co who says companies like Pretium and Torex are ripe for the picking as companies looking to replace divested older and unprofitable assets with high-quality, high-margin ones.

"Pretium’s project in British Columbia has high grades, which will probably make it attractive to larger miners," Joe Ovsenek, the company’s chief development officer, said by phone to Bloomberg.

Many of the pre-revenue exploration and developers will continue to have incentives to sell as they will keep struggling to finance their assets.

“Darwinism is alive and well in the gold industry right now,” Joe Wickwire (manages more than $1.5 billion at Fidelity Investments, including the Select Gold Portfolio) said by phone to Bloomberg last month. While ultimately there will be fewer companies producing less gold, “the profitability of the industry is going to go up.”

The article sites the recent Asanko Gold and PMI Gold merger as well as Primero's acquisition of Brigus as evidence that the tides are turning. Mergers of equals with little-to-no premiums will be a good way for companies to reinvent themselves, reduce costs and strengthen their balance sheets, said Matthew Hind, head of Canadian metals and mining investment banking at Credit Suisse.

Newmont Chief Executive Officer Gary Goldberg said on Sept. 24 the largest U.S. gold producer was searching for acquisitions to add low-cost gold or copper output after asset valuations fell. Their chart reflects those "falling asset valuations."

NEM data by YCharts

Read: Gold Mining Deals Seen Rebounding on Price Discount

Travis McPherson

trav@ceo.ca

Travis McPherson

trav@ceo.ca

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One thought on “Gold Mining Deals Seen Rebounding on Price Discount: Bloomberg”

James Nassir says:

January 8, 2014 at 3:26 pm

The above article should have pointed out that in Dec 2013, Klondex is paying NEM $83 Million Cash plus 5 million Warrants on Klondex Stock for the Midas Mines & Mill owned by NEM; NEM VP Executive said the deal will close in early 2014 as a Portfolio Adjustment since the Midas Mines has only a few years left, however, Klondex plans to make alterations to the mine to hopefully extend its life 20 years; so this is a win-win situation. Jan 8, 2014 at 2:26 pm PST.