OPINION: Gold mining CEOs wary of deals after a decade of value-destroying takeovers – by Andrew Willis (Globe and Mail – January 25, 2020)

https://www.theglobeandmail.com/

You’re the chief executive at one of Canada’s many mid-tier gold miners. You’ll make something in the neighbourhood of $5-million this year.

If you just show up for work every day and don’t do a deal, you’ll likely be paid about the same amount next year. But your miners will spend the whole year digging and turn a significant portion of your gold reserves into gold bullion, which means you’re one year closer to turning your mid-tier company into a small-cap miner. And that is not the reason shareholders are paying you all that money.

As CEO, you’ve got board members, investors and bankers urging you to replace those declining reserves by staging a takeover. Jump in, they tell you, the water’s fine. But you look at the destruction of wealth that’s come with the majority of mining acquisitions over a period of decades. And you recall the resulting carnage in the ranks of fellow CEOs. So you hesitate.

Welcome to the corner office of a modern mining company. CEOs and boards have a well-founded reluctance to roll out acquisition-based growth strategies. However, gold bullion prices are rising and everyone agrees that the sector is ripe for consolidation.

A few brave souls already stepped up late in 2019, buying smaller rivals or mines that senior producers no longer wanted. Takeovers are coming in the Canadian gold industry.

For the rest of this column: https://www.theglobeandmail.com/business/commentary/article-gold-mining-ceos-wary-of-deals-after-a-decade-of-value-destroying/