Small remains beautiful for gold mining acquisitions – by Nicole Mordant (Reuters U.S. – January 23, 2018)

VANCOUVER (Reuters) – Small, opportunistic deals will dominate the global gold mining sector again this year, analysts said on Tuesday, after Leagold Mining Corp unveiled a $264 million bid for fellow Canadian gold miner Brio Gold Inc.

Six years after the last mining boom ended with billions of dollars in writedowns following over-priced mega-acquisitions, miners remain wary of big purchases, despite a 13 percent rebound in the gold price last year and the need for producers to replace mined-out ounces.

That is captured in falling M&A, with the value of global gold mining deals dropping to a three-year low of $10.6 billion last year, down 14 percent on 2016, according to Thomson Reuters data. The number of deals, however, jumped 70 percent to 648, as miners played it safe with smaller purchases.

“There is a strong focus on cash generation and ‘fundability’ from investors, so I think for now larger deals would be hard to sell to the market,” said Hedley Widdup, a fund manager at Melbourne-based Lion Selection Group, which invests in small mining companies.

Earlier on Tuesday, Leagold, which was formed just 17 months ago and operates a single mine in Mexico, unveiled its intention to make an all-share offer for Brio, which owns three, small mines in Brazil and a fourth scheduled to reopen by year-end.

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