Barry Fitzgerald
Resources Editor
Melbourne
Barry FitzGerald has covered the resources industry for 30 years. The inaugural winner of the Diggers & Dealers Media Award in 2003, Barry is a committee member of the Melbourne Mining Club, a non-profit organisation formed to foster industry debate.
Merger and acquisition activity in the gold sector is tipped to step up in coming months as producers convert their swollen cash balances into new growth opportunities.
Companies attending the Resources Rising Stars conference on the Gold Coast report both an increased interest in M&A on their account to secure growth, as well as stepped takeover soundings.
Underpinning the buzz around M&A is the march in the local gold price to near record levels of more than $A1,740 an ounce, delivering margins of more than $700 an ounce to the average producer.
Hedley Widdup, executive director of junior mining investment specialist Lion Selection, said that private equity and Chinese buyers and come back in to the M&A space, both in gold and other commodities.
“There is a lot of cash sloshing out there. It is too early to tell you what the major transactions will look like but there is a number which are rumoured,” Mr Widdup said.
In the gold sector, most takeover chatter has been around Dacian Gold and Gold Road.
Bill Beament, managing director of Australia’s third biggest gold producer Northern Star, said the company would remain alert to opportunities but that it was not a burning issue given organic growth was locked in to take annual production from 570,000 ounces to more
than 700,000 ounces from 2017.
Northern Star has grown rapidly in the last five years by acquiring assets shed by the world’s biggest gold miners, Barrick and Newmont.
And it’s the growth challenges that face the global giants which Mr Beament suspects could lead to big end of town M&A activity.
He said the gold majors needed to tackle their reserve depletion problem, a function of the lack of major discoveries in recent years and the move from surface to underground mining where forward reserves are more difficult to define.
“It’s the elephant in the room,” Mr Beament said. Glenn Dovaston, chief executive of Millennium Minerals, said it was clear that the M&A space was headed to “quite interesting times”.
Millennium could be on both sides of the action.
While Millennium itself is looking to M & A to provide a new growth platform, its turnaround to a profitable and debt free producer from its Pilbara operation in the last eight months has also got the drums beating on its appeal as a takeover target.
Millennium now has a $100 million market capitalisation and expects to produce 85,000 ounces of gold at around $1,200 an ounce in 2016.
MOY Price at posting:
13.5¢ Sentiment: Buy Disclosure: Held
