Major gold mining companies are set to extend a deal rally after sealing a record $30 billion worth of contracts this year, latest data show.
The deal spree marks the most valuable merger and acquisition binge since gold prices hit their highest peak almost 10 years ago.
Led by top producers Newmont Goldcorp Corp and Barrick Gold Corp, miners are bulking up to replace dwindling reserves and win back investors who, due to disappointing returns, have shunned the industry in recent years.
According to information from Refinitiv Eikon, this year there were 348 transactions valued more than $30.5 billion, including net debt.
That figure is up from last year's $10.8 billion, exceeding a previous $25.7 billion set in 2010, the data show. Gold topped $1,900 per ounce in 2011 and is trading around $1,484 at the moment after hitting a six-year high in September.
Cautious stance
The gold boom in 2011 prompted buyers to spend too much on acquisitions, leading to billions of impairments when prices collapsed in the years thereafter. This time, investors say they are more cautious about buyers.
The premiums associated with recent gold deals are well below those charged in the previous price bubble when the premiums were not rare at 40 percent to 50 percent.
In September, the gold investment group Paulson urged the smaller gold miners to seek zero-premium fusions to eliminate duplication and lower costs.
When it bought Africa's Randgold last year, Barrick paid no premium, while Newmont offered an 18 percent premium when it snapped Goldcorp to create the world's largest gold mining conglomerate.
More deals are likely among mid-tier miners, who are faced with pressure from activist investors to reduce costs and financial constraints, said Peter Grosskopf, chief executive officer of precious metals fund manager Sprott Inc.
Mergers galore
In a whirlwind of acquisitions this week, a $1.9 billion all-stock takeover offer for Africa-focused Centamin Plc was initiated by Canada's Endeavour Mining Corp.
A day ago, China's Zijin Mining Group Co Ltd signed an agreement to procure $1.3 billion in cash from Continental Gold Inc.
Kirkland Lake Gold Ltd. offered a buyout bid for Detour Gold for C$ 4.3 billion in November, while Saracen Mineral Holdings Ltd. took a major share at Barrick Gold in Australia's Super Pit gold mine.
"That pendulum has just begun to swing and it has much more to go," said Grosskopf, referring to more deals.
According to industry sources, among possible targets are Pretium Resources Inc, Pure Gold Mining Inc, Roxgold Inc, and Silvercrest Metals Inc.
Iamgold Inc, a Canadian producer, has also drawn attention from state-backed China Gold International Resources Corp Ltd.
