TORONTO (Reuters) – Two recent large M&A deals in the gold sector have prompted speculation that Newcrest Mining (NCM.AX), Kinross Gold Corp (K.TO) and B2Gold Corp (BTO.TO) may be among the next gold companies to combine with a rival, bankers and analysts said.
On Monday, Newmont Mining (NEM.N) announced a $10 billion takeover of Goldcorp Inc (G.TO), close on the heels of Barrick Gold’s (ABX.TO) purchase of Randgold Resources.
Deal-making had largely been dormant in the gold sector in recent years, as companies focused on cutting costs amid investor criticism of inadequate management of capital. But the need to bolster shrinking gold reserves to boost growth and take advantage of rising gold prices are now providing the impetus for consolidation.
“There are potential benefits to consolidation and gold miners that can generate returns above cost of capital will likely be rewarded over time,” Chris LaFemina, an equity analyst at Jefferies, wrote in a note on Monday.
Gold producers who have good assets but face stagnant growth are seeking to partner with well-run companies, according to bankers and analysts. Eyes are on Australia’s Newcrest, capitalized at around 18 billion Australian dollars ($13 billion), a banker close to the Newmont-Goldcorp deal said.