Momentum is building for M&A across the gold industry driven by the market, balance sheets, and shareholders, a new report, An Activist Gold Rush? by Kingsdale Advisors released Thursday finds.
Behemoths Barrick (NYSE: GOLD, TSX: ABX) and Newmont Goldcorp (NYSE: NEM, TSX: NGT) have grabbed headlines with acquisitions of Randgold and Goldcorp respectively.
According to Kingsdale, the junior and intermediate space has seen a flurry of deals as well.
Q4 2018 and Q1 2019 over C$20 billion ($15 billion) in deals announced in the gold industry involving Canadian listed companies and 13 activist campaigns in the last 26 months, the report reads.
The foundation upon which deals are being built is stronger, analysts say.
Both potential acquirors and shareholders are seeing a new age of opportunity dawning. After years of increased financial discipline, cutting costs and prudent capital spending, many companies have stronger balance sheets, the report reads.
Kingsdale analysts found that unlike acquisitions of the past which were often motivated by the potential of increased gold production or diversification, recent M&A deals have focused more on capital efficiency and operational excellence, with the management team being one of the assets (or liabilities) evaluated.
Additionally, Kingsdale has seen a shift away from a ‘size for size’s sake’ mindset to owning and focusing only on the best assets. With the giants of the industry growing, pressure will increase on others to improve as well, recognizing the need for rationalization and scale, the analysts warn.
Read the full report here.
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