SYDNEY/HONG KONG – A dramatic slide in gold prices this week threatens to squash a run of mining mergers and acquisitions just as momentum in the sector was picking up.
Mining executives and fund managers warn predators will turn more cautious before splashing out cash or approving capital raisings, at least until bullion shows signs of stabilising.
The value of completed gold mining mergers and acquisitions so far this year has reached $3.2 billion, compared with $4.4 billion for all of 2014, according to Reuters data.
Gold this week took its sharpest dive since September 2013, landing at $1,088 per ounce, a five-year low. That sent key indices measuring the health of gold mining companies crashing in its wake.
The Australian and Canadian indices fell 11 percent each, while the Johannesburg Stock Exchange gold index dropped 12 percent.
“There’s still an appetite to grow through M&A (mergers and acquisitions)” said Hedley Widdup, a fund manager at Melbourne-based Lion Selection Group, which invests in small mining companies and explorers.
“The issue now is shareholders and funds providers will be looking at the gold price and wondering about valuation,” Widdup said.
John Tivey, a partner at law firm White & Case in Hong Kong, said gold price volatility was a setback for deal-making as it made it hard to agree on valuations.
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