the tide has turned!, page-55

FYI

Tuesday, 14 January 2014
MINING NEWS PREMIUM



MACQUARIE analysts have flagged an increase in gold deals, just as a major hostile takeover was announced in Canada overnight.

Analysts looked at 15 merger and acquisition deals in 2013 from the gold space, including Alacer Gold’s asset sale to Metals X, Troy Resources’ takeover of Azimuth Resources, Teranga Gold’s acquisitions and Goldfields’ purchase of Barrick Gold’s Yilgarn South assets.

“We note the pace deals picked up in 4Q13 with 10 of 15 deals announced in the quarter,” Macquarie said in a report on Australian gold equities.

“We attribute the weaker gold price and inability of the developers to finance to the high number of deals in 4Q13 as management teams capitulate.”

For the 15 deals, Macquarie said the average premium paid for producers was 35% and 53% for explorers and developers.

Based on the increase in deals at the end of last year, Macquarie flagged M&A to continue in the current price environment.

And based on news out of Canada overnight, analysts are spot on with Goldcorp, the world’s biggest gold miner by market capitalisation, announcing an unsolicited $C2.6 billion takeover offer for smaller Quebec-based producer Osisko Mining.

Macquarie has tipped African gold hopeful Gryphon Minerals as a potential takeover target in the Australian space.

Any bid for Gryphon would follow heightened activity in the African space, with Teranga acquiring Oromin Explorations, Asanko Gold and PMI Gold agreeing to merge and Centamin making a takeover offer for Ampella Mining.

Meanwhile, Macquarie said in the face of continuing gold price volatility in 2014, it would continue to favour good assets coupled with experienced management teams and strong balance sheets.

“Cost containment, reserve downgrades, more hedging, limited builds and good judgement are some of the key themes we see as continuing in 2014,” Macquarie said.

Analysts have flagged further write-downs in the upcoming reporting season and revised reserve and resource statements at lower gold prices.

“The majority of the ASX gold equities have June year-ends so will be able to avoid making the tough announcements on reserve statements and asset carrying value for another six months,” Macquarie noted.

“A swathe of write-downs across the sector in early 2014 will ensure the focus remains on balance sheets and free cashflow generation over the course of the year.”

Macquarie’s top Australian gold picks for 2014 are Beadell Resources, OceanaGold Corp, Northern Star Resources and Papillon Resources.

Beadell was up 5.5% to A86.5c this morning, OceanaGold was up 3.9% to $1.792, Northern Star gained 2.4% to 94.7c and Papillon rose 0.9% to $1.135.