World Economy

Gold Industry’s $50b M&A Spree Builds

Gold Industry’s $50b M&A Spree Builds
Gold Industry’s $50b M&A Spree Builds

A $50 billion gold-industry deals spree is extending into its third year, even as a surging bullion price makes sealing transactions and valuing mines more difficult.

Gold has regained its luster as investors seek havens from volatile markets and weak interest rates. While the metal is up about a quarter this year, the value of mergers and acquisitions has soared. The average paid in 133 transactions in the three months to June was $64 an ounce of gold equivalent in the ground, up from $36 in the first quarter of 2016, as buyers factor in better long-term price expectations, according to Bloomberg Intelligence.

“Companies are receptive to doing deals and there are sellers there, and naturally they are trying to get the prices up,” according to Liam Twigger, managing director of industry adviser PCF Capital Group Pty, which has acted in about 80 transactions over the past seven years and advised clients including Barrick Gold Corp. “There’s enough value in companies’ share prices, and enough capital’s been raised, to enable these deals to be done.”

Barrick, the biggest producer, last week announced plans to sell its 50% share in Australia’s largest open-pit gold mine and joint owner Newmont Mining Corp. has signaled it would be willing to buy the stake at the right price. The stake may fetch as much as $1 billion, according to people familiar with the matter, while analyst valuations range from $400 million to about $1.5 billion.

Mergers and acquisitions and the metal’s surge this year after three straight annual declines will be major topics discussed by about 1,800 delegates, including executives from Newmont and AngloGold Ashanti Ltd., at the annual three-day Diggers and Dealers mining sector forum in the western Australian town of Kalgoorlie.

Completed and pending gold sector deals totaled almost $9 billion in the first half, including Newmont’s $1.3 billion sale of Indonesian copper and gold assets to a local consortium and Centerra Gold Inc.’s $1.1 billion purchase of Thompson Creek Metals Co. Volumes rose in 2015 to $21 billion, the highest annual total since 2011.

Meanwhile, bullion for immediate delivery was little changed at $1,350.63 an ounce in Sydney, according to Bloomberg generic pricing. It’s rallied 27% this year, rising 2.2% in July after back-to-back quarterly gains.