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The big run in gold bullion means potentially higher profits for miners, but investors say the same dynamic is stifling mergers and acquisitions (M&A) activity, as both buyers and sellers struggle to come to grips with where the commodity price will eventually land.
“When the gold price is rising, it’s going to be hard to get deals done. But if you saw it settle at US$1,500 [an ounce] for five or six months, I think you’d start seeing deals again,” said Jonathan Goodman, chief executive of investment manager Dundee Corp., and chairman of gold-mining company Dundee Precious Metals Inc.
After trading sideways for the best part of three years, gold has risen by about 20 per cent in 2019, as investors buy the precious metal as a hedge against macroeconomic troubles, including a global economic slowdown, and geopolitical tremors, such as the continuing trade war between the United States and China. On Friday, gold futures traded at around US$1,520 an ounce.
Gold M&A started with a bang this year, with Barrick Gold Corp. closing its zero-premium, US$6-billion acquisition of Randgold Resources Ltd. in January, and Newmont Mining Corp. (now Newmont Goldcorp Corp.) announcing the same month it was scooping up Vancouver’s Goldcorp Inc. for US$10-billion.
However, since then, just a handful of deals have been announced, including Australia’s St. Barbara Ltd. buying Vancouver-based Atlantic Gold Corp. for $722-million in May, and Toronto-based Kinross Gold Corp. purchasing a Russian gold development project for US$283-million in July.
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