SMALL gold miners in Western Australia are searching for scale and synergies in Kalgoorlie's old goldfields, but lack of asset quality will make consolidation difficult.
Avoca Resources kicked off the consolidation talk with a takeover offer for Dioro Exploration in April, which intensified when another gold miner in the area, Ramelius Resources, trumped the director-recommended bid with a $92 million offer late last month.
Avoca managing director Rohan Williams has dubbed consolidation in the area -- home to the Superpit, Australia's largest open cut gold mine, owned by Newmont Mining and Barrick Gold -- a "once in a decade opportunity".
Gold was discovered in the area in 1893 but the Superpit in its present form has only been in operation since 1989, after the consolidation of a number of small underground mines.
Analysts see few operational synergies beyond a pairing of either Avoca or Ramelius with Dioro.
"Conceptually consolidation sounds like a good idea, but you have to get enough good-quality assets together to make sense," said Gavin Wendt, analyst at Sydney research firm Fat Prophets.
Practical reasons for amalgamation, such as getting to a size that improves liquidity of the stock and access to capital, could still spark some mergers and acquisitions, but "I can't see it happening in a widespread way," said Tony Parry, senior research analyst at Resource Capital Research.
"For that you'd need companies in distress but at the moment gold miners are highly rated."
The crop of gold hopefuls near Kalgoorlie includes Focus Minerals, Norton Goldfields, Silver Lake Resources and Integra Mining.
Only a merger of Silver Lake and Integra would offer real operational synergies, given the proximity of the two companies' producing assets and the boost to treatment plant capacity, analysts said.
A strongest impediments to takeover activity are ageing assets and low grades, with most easy surface gold mining depleted during the 1980s and very few high-grade discoveries in the past 20 years aside from Avoca's Trident ore body.
Companies should look beyond their asset base in the Kalgoorlie goldfields and think about bringing together valuable tenements in a high-gold price environment, said Barry Dawes, managing director at boutique resources investment firm Martin Place.
"You need strong management now, as the easy mining is done. That's why it's a good idea to consolidate a lot of the tenements," Mr Dawes said.
"We already have a big pit in Kalgoorlie, and there's no reason why there couldn't be more large pits in the Western Australia greenstone belt.
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