Deal making in the Canadian gold sector went into overdrive in 2019 and industry players expect that is likely to continue in 2020, with smaller companies becoming targets as fund managers push the industry to create bigger, more diversified miners.
In 2019, $31.8-billion worth of gold-mining deals were announced, the largest on record for the Canadian gold sector, according to data from Refinitiv. Headline deals included Newmont Gold Corp.’s US$10-billion purchase of Goldcorp Inc., Kirkland Lake Gold Ltd.’s $4.9-billion bid for Detour Gold Corp. and China’s Zijin Mining Group Co. Ltd.’s planned acquisition of Canada’s Continental Gold Inc. for $1.4-billion.
The merger and acquisitions bonanza is being driven by a number of factors, including the need for companies to replace reserves, cut costs, increase production and attract more interest from institutional investors.
The move toward lower-cost exchange-traded funds (ETFs) has pushed more money toward larger-cap companies that have membership in stock market indexes – and that, in turn, is giving larger miners an advantage on the cost of capital over smaller ones.
Given that, a number of gold industry watchers say there are still too many smaller mining companies competing for a limited pool of capital – a dynamic that’s expected to drive even more M&A in 2020.
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