VANCOUVER – The global gold mining industry is showing signs of life as merger activity picks up and industry veterans set up new companies and hunt for projects, taking advantage of weak prices to lay the groundwork for a rebound.
Almost four years after the price of gold began tumbling, cash-starved and debt-ridden miners are selling, merging or closing shop, pushing the value of completed gold mining mergers and acquisitions in the first five months of this year to $3 billion, twice what it was in the same period in 2014, according to Thomson Reuters GFMS, a metals research consultancy.
At the same time, with stock markets near record highs, some fund managers are examining the sector. In the first quarter, Paris-based asset manager Carmignac Gestion bought 11.65 million shares of Goldcorp (G.TO), the highest valued gold mining company, making it the Vancouver-based miner’s eighth biggest shareholder, Thomson Reuters data show. Carmignac declined to be interviewed for this article.
“The perception that mining equities show good value is starting to spread,” said Hedley Widdup, a fund manager at Melbourne-based Lion Selection Group, which invests in small mining companies and explorers.
“Since the start of this year, there has definitely been a change in sentiment,” he said, though it “is far from pervasive.”
To be sure, no one is expecting an overnight resurgence and signs of pain are still widely visible – in bankruptcy filings, job cuts and an industry preoccupation with reducing costs.
And though the gold price is not forecast to recover this year, a rebound could start next year, albeit slowly. GFMS is forecasting an average price of $1,170 an ounce this year, below the current $1,185. Its 2016 forecast is $1,250.
“We felt that finally it looked as though you might be able to pick up projects,” said Marc Prefontaine, Chief Executive of Canadian gold miner Orla Mining (OLA.V), which started operations this month. He said he didn’t know when the gold market would rebound, “but we just felt it was not going any lower.”
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