Gold miners’ profits ‘set to explode’, but companies persist with no-premium mergers – by Gabriel Friedman (Financial Post – May 12, 2020)

The gold sector may have reached a critical juncture

In a reminder that some market forces still exert more power than the economic fallout from COVID-19, Vancouver-based SSR Mining Inc. on Monday announced a no-premium, all-stock “merger of equals” with Denver-based Alacer Gold Corp. that was months in the making and would create a US$4 billion company.

The deal marks the latest in a string of mergers in the gold sector during the past 18 months, a trend which has continued even as the coronavirus pandemic has radically handicapped investors’ ability to conduct due diligence such as site visits to mines.

During a presentation to analysts on Monday, Rod Antal, who will move up from chief executive of Alacer to chief executive of the newly combined entity, SSR, once the deal closes in the third quarter, bluntly dismissed coronavirus as a factor, saying talks started last November, allowing ample time for face to face meetings before the pandemic.

While the combination doesn’t offer any obvious operational synergies, and any savings on corporate expenses have yet to be calculated, Antal and outgoing SSR CEO Paul Benson promised that the scale and diversification of a combination would bring relevance in a world crowded with intermediate gold producers.

“At a time when investors are looking for exposure to rising gold prices, we’re very excited to be creating a larger more globally relevant gold company,” Paul Benson, outgoing chief executive of SSR told analysts.

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