Michael Bennet From: The Australian August 23, 2011 PERSEUS...

Michael Bennet From: The Australian August 23, 2011

PERSEUS Mining and Teranga Gold could be the next gold miners in corporate activity after the $600 million Adamus Resources deal, as juniors continue to consolidate to fill the "genuine mid-tier gap" in Australia's gold sector.

After Newcrest Mining's $10 billion takeover of Lihir Gold, the gold sector has been one of the busiest for dealmaking, along with coal, as local and international miners scramble to grow through acquisition to increase production and market value amid the soaring gold price.

The spot price of gold this morning touched a fresh high of $US1911.54 as continued global jitters push investors into the safety of the precious metal.

After the Lihir deal, US major Goldcorp swooped on Andean Resources - at the time Australia's second-biggest goldminer - in a $C3.6 billion ($3.49bn) deal, followed by Canada's Anatolia Minerals move on Perth-based Avoca Resources, which created Alacer Gold.

Catalpa Resources, Conquest Mining, Focus Minerals and Crescent Gold are also exploring various deals.

But after Adamus became the latest yesterday as it merged with Canada's Endeavour Mining to form a $US600 million West African-focused gold play listed in Sydney and Toronto, Goldman Sachs analysed other small-cap producers that could be targets.

Analyst Ian Preston said the key reason for the wave of gold activity was driven by a need to diversify operational risk, reduce gold hedge-book commitments and increase both production and market capitalisation.

He said the Adamus deal provided continued evidence West Africa remained one of the most "exciting global postcodes" for resource growth and corporate activity in the gold space, and cited Teranga as a potential target and the larger Perseus as potential suitor.

"It is clear that the market is happy to afford a premium to those companies which have potential, but have not yet disappointed the market through capital blowouts of production disruptions," he said. "Teranga's share price is well below what we think is an appropriate value. Trading at these levels, we would view Teranga as susceptible to takeover."

In contrast to Teranga's market value of about $350m, Perseus is valued at about $1.4bn as investors bet on a smooth ramp-up to full production at its Central Ashanti project in Ghana, which Mr Preston said could make its scrip come under favourable viewing.

"With scrip priced as such, we argue that Perseus is well placed to acquire additional production using paper," he said.....