Post by Zoinkers on Oct 22, 2006 18:17:48 GMT -5
By James Attwood
Last Update: 5:07 AM ET Oct 16, 2006
SYDNEY (Markethingych) -- Consolidation in the global gold industry is
expected to gain pace in coming months after the recent merger flurry
among industrial metal producers.
Driving the latest round of interest is waning enthusiasm for raising
project capital on equity and debt markets as some of the heat comes
out of bullion prices against a backdrop of rising costs and a dearth
of major discoveries.
"Gold stocks are starting to see consolidation and I'm sure we're going
to see a lot more happening...there's a lot of discussion in the
industry now," said Wayne Seabrook, an investment banker at
Sydney-based Wilson HTM.
Since Canada's Barrick Gold (ABX) acquired Placer Dome earlier this
year to replace Denver-based Newmont Mining Corp. (NEM) as the world's
top gold producer, the industry has seen a steady flow of mergers and
takeovers. But corporate linkups in gold have been overshadowed in
recent months by industrial commodity sectors as the likes of Xstrata
(XTA.LN) and Phelps Dodge (PD) seek entry to the mining big leagues
dominated by BHP Billiton (BHP) and Rio Tinto (RTP). Now, however, the
mining merger spotlight appears to be moving back to gold.
Barrick is back in the news as it seeks to tuck in the assets of much
smaller Canadian player NovaGold Resources Inc. (NG).
While analysts continue to speculate on how, or who, Newmont may look
at to regain its number one status; Australia's largest independent
gold producer, Newcrest Mining, is often named as a potential target.
"Expect to see a lot of M&A activity in this sector over the coming
year," said Jonathan Barratt, managing director of Sydney-based
Commodity Broking Service.
"Good mid cap producers will be sort after by large producers as they
need to replace the gold they are taking out of the ground," Barratt
said. But M&A activity won't be confined to the big end of the market,
according to analysts and investment bankers.
"Frankly time is running out for some of the smaller cap guys in some
respects as the capital markets are not so attracted towards some of
these commodities as they were a year ago," said Wilson HTM's Seabrook.
Sensible corporate tie-ups offer a way to gain operational and
administrative efficiencies and keep companies on investors' radars, as
well as a way to lighten out-of-the money hedge books.
Speculators Bet On Where Next Deal Coming From...
In Australia, Perseverance Corp. (PSV.AU) this month launched a A$46
million friendly bid for Leviathan Resources Ltd. (LVR.AU) and on
Friday Ballarat Goldfields NL (BGF.AU) told the market it is in merger
talks with an unnamed party.
Speculation over where the next deal will come from has day traders
piling in and out of stocks.
In the second such statement in as many months, Melbourne-based Oxiana
(OXR.AU) said Friday it was unaware of any basis to takeover
speculation that added upwards of A$400 million to its market value the
previous trading day.
Investors are also pondering the identify of Ballarat Goldfields'
suitor, with Papua New Guinea-focused Lihir Gold (LHG.AU) and
Thailand-focused Kingsgate (KCN.AU) among those touted.
While companies like Lihir are looking to spread geographical risk
through acquisition, others operating in similar geographical regions
are expected to join forces to gain scale and reduce running costs.
In China's still fragmented and cash-strapped gold industry, Sino Gold
Ltd. (SGX.AU) expects to be one of only a handful of large players left
standing on the conclusion of an already underway consolidation period.
On the flipside, by establishing a platform for both organic and
corporate growth in the nascent Chinese market, some analysts see Sino
Gold as a growing takeover target.
Another Chinese operator, Zijin Mining Group Co. (2899.HK), last month
took its first steps to grow outside of China, agreeing to take a 10%
stake in PNG-focused Allied Gold Ltd. (ALD.AU) for A$18 million.
Mike Stirzaker, joint managing director of Sydney-based investment bank
RFC Group Ltd. agrees further M&A activity is likely - not just in gold
but throughout resources.
A key driver is the divergence between mining companies' bullish
outlooks and a wary investment community after funds pilied into
commodities too heavily during the run-up in prices in the first five
months of the year, he said.
-Contact: 201-938-5400
Last Update: 5:07 AM ET Oct 16, 2006
SYDNEY (Markethingych) -- Consolidation in the global gold industry is
expected to gain pace in coming months after the recent merger flurry
among industrial metal producers.
Driving the latest round of interest is waning enthusiasm for raising
project capital on equity and debt markets as some of the heat comes
out of bullion prices against a backdrop of rising costs and a dearth
of major discoveries.
"Gold stocks are starting to see consolidation and I'm sure we're going
to see a lot more happening...there's a lot of discussion in the
industry now," said Wayne Seabrook, an investment banker at
Sydney-based Wilson HTM.
Since Canada's Barrick Gold (ABX) acquired Placer Dome earlier this
year to replace Denver-based Newmont Mining Corp. (NEM) as the world's
top gold producer, the industry has seen a steady flow of mergers and
takeovers. But corporate linkups in gold have been overshadowed in
recent months by industrial commodity sectors as the likes of Xstrata
(XTA.LN) and Phelps Dodge (PD) seek entry to the mining big leagues
dominated by BHP Billiton (BHP) and Rio Tinto (RTP). Now, however, the
mining merger spotlight appears to be moving back to gold.
Barrick is back in the news as it seeks to tuck in the assets of much
smaller Canadian player NovaGold Resources Inc. (NG).
While analysts continue to speculate on how, or who, Newmont may look
at to regain its number one status; Australia's largest independent
gold producer, Newcrest Mining, is often named as a potential target.
"Expect to see a lot of M&A activity in this sector over the coming
year," said Jonathan Barratt, managing director of Sydney-based
Commodity Broking Service.
"Good mid cap producers will be sort after by large producers as they
need to replace the gold they are taking out of the ground," Barratt
said. But M&A activity won't be confined to the big end of the market,
according to analysts and investment bankers.
"Frankly time is running out for some of the smaller cap guys in some
respects as the capital markets are not so attracted towards some of
these commodities as they were a year ago," said Wilson HTM's Seabrook.
Sensible corporate tie-ups offer a way to gain operational and
administrative efficiencies and keep companies on investors' radars, as
well as a way to lighten out-of-the money hedge books.
Speculators Bet On Where Next Deal Coming From...
In Australia, Perseverance Corp. (PSV.AU) this month launched a A$46
million friendly bid for Leviathan Resources Ltd. (LVR.AU) and on
Friday Ballarat Goldfields NL (BGF.AU) told the market it is in merger
talks with an unnamed party.
Speculation over where the next deal will come from has day traders
piling in and out of stocks.
In the second such statement in as many months, Melbourne-based Oxiana
(OXR.AU) said Friday it was unaware of any basis to takeover
speculation that added upwards of A$400 million to its market value the
previous trading day.
Investors are also pondering the identify of Ballarat Goldfields'
suitor, with Papua New Guinea-focused Lihir Gold (LHG.AU) and
Thailand-focused Kingsgate (KCN.AU) among those touted.
While companies like Lihir are looking to spread geographical risk
through acquisition, others operating in similar geographical regions
are expected to join forces to gain scale and reduce running costs.
In China's still fragmented and cash-strapped gold industry, Sino Gold
Ltd. (SGX.AU) expects to be one of only a handful of large players left
standing on the conclusion of an already underway consolidation period.
On the flipside, by establishing a platform for both organic and
corporate growth in the nascent Chinese market, some analysts see Sino
Gold as a growing takeover target.
Another Chinese operator, Zijin Mining Group Co. (2899.HK), last month
took its first steps to grow outside of China, agreeing to take a 10%
stake in PNG-focused Allied Gold Ltd. (ALD.AU) for A$18 million.
Mike Stirzaker, joint managing director of Sydney-based investment bank
RFC Group Ltd. agrees further M&A activity is likely - not just in gold
but throughout resources.
A key driver is the divergence between mining companies' bullish
outlooks and a wary investment community after funds pilied into
commodities too heavily during the run-up in prices in the first five
months of the year, he said.
-Contact: 201-938-5400