Gold Miners Burned by Bad Deals Are Again Rushing to M&A – by Kevin Crowley (Bloomberg News – February 8, 2017)

It’s been a dirty word in the gold-mining industry for the last three years, but now companies can’t stop saying it: growth.

Top executives are on the hunt for mergers and acquisitions, and focusing on exploration as the industry emerges from survival mode. Gold prices have recovered and cost cuts are taking effect, delivering profits for companies that need to remedy a shortage of new discoveries and declining reserves.

The trouble is that they have a bad history when it comes to dealmaking. In the China-led commodity boom, the entire mining industry spent heavily on deals and big projects that soured when metals prices later collapsed. Companies wrote off close to $100 billion between 2011 and 2016, according to analysts at Investec Ltd.

Gold producers say this time will be different, but the losses generated by a decade of wasteful spending during the bull market to 2011 are still fresh in investors’ memories. While gold gained 8.2 percent this year to $1,241.53 an ounce, that’s much lower than the record of more than $1,900 set five years ago.

“All of us have got one issue and that’s we haven’t much exploration in the last 10 years, and all our assets’ lives are getting shorter,” Peter Steenkamp, chief executive officer of Harmony Gold Mining Co., said in an interview at the Mining Indaba conference in Cape Town. “Everybody is looking to replace the ounces that they’re mining.”

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