Despite the fact that global M&A activity is down as much as 30% year-over-year, the gold sector has seen some notable transactions in May.
Thus far, three deals were pending in the month. This includes a now-abandoned three-way merger that would have seen Gran Colombia Gold acquire both Gold X Mining and Guyana Goldfields, as well as a merger between SSR Mining and Alacer Gold. At the same time, Adriatic Metals was scheduled to buy Tethyan Resource.
Experts say that the SSR Mining deal has been described as a merger of equals. On the other hand, Adriatic said the Tethyan acquisition would strengthen its portfolio with Serbian assets. Gran Colombia’s deal was said to be a friendly merger with Gold X and a hostile takeover of Guyana Goldfields. Each of the deals was contingent on the other being finalized.
M&A activity means that mining executives have confidence in the gold bull market—so much so that are willing to commit to acquisitions, one industry analyst said. Large-scale deals are believed to create synergy in the sector, which encourages interest from investors and promotes additional activity. Further, hostile takeovers can result in bidding wars, which can also magnify gold market momentum.
According to Refinitiv, a financial market data provider, January 2020 saw the smallest number of takeovers and deals in nearly seven years. But even with the onset of COVID-19, rising gold prices and spiking demand look to have cleared the path for the second quarter deals mentioned above.
And although global M&A activity was lower initially in 2020, gold sector transactions—particularly in Canada—have been on the rise since late 2018. To that end, last year had a large amount of deal-making for companies in the country, with the total amount of more than US$23 billion.
In 2019, there were more than 12 transactions that ranged from total takeovers to project purchases. Last year began with one of the most lucrative acquisitions in mining history: Colorado’s Newmont Mining Corporation announced plans to buy Vancouver-based Goldcorp for US$10 billion, which formed the largest gold company globally by output. The merger came several months after Newmont announced its plans to spend US$18.3 billion on Randgold Resources. Randgold itself completed a share-to-share merger with Canada’s Barrick Gold Corp in a late 2018 deal worth $18.3 billion. However, Barrick Gold picked off Randgold and then set its eyes on Newmont Mining. After a hostile takeover failed, the two announced a joint venture in March 2019 that involved both companies’ large Nevada mines.
And last May, Australian precious metals miner St. Barbara said it would buy Canadian company Atlantic Gold for US$550 million. That gave the Australian mining operation ownership of low-cost Moose River Consolidated open-pit operation located in Nova Scotia which started commercial production in 2018.
In August 2019, Resolute Mining announced that it would be acquiring Africa-focused Toro Gold. Resolute’s decision was primarily made to add Toro’s Mako mine in Senegal to its portfolio of projects. The deal value was $130 million in cash and 142.5 million Resolute shares.
Also last summer, Osisko Gold Royalties released its plans to buy Barkerville Gold of Toronto for a total of US$245 million.
The fourth quarter of 2019 also noted an uptick in activity, as eight of the 12 deals closed in that time frame. There was a corresponding increase in project purchases during that quarter.
While last year was an eventful year in terms of M&A, and although 2020 has seen unprecedented uncertainty, most experts and analysts think that the gold sector is ready to see more deal-making as the year goes on.
“At a time when investors are looking for exposure to risingprices, we’re very excited to be creating a larger more globally relevant gold company,” Paul Benson, SSR’s outgoing CEO told analysts when announcing that company’s deal with Alacer Gold.