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Gold mining deals expected to pick up this year

  • With the gold mining sector at its cheapest relative value in at least two decades (according to Bloomberg), investment bankers are sniffing around in hope of a rebound in M&A deals. There were just $10.1B in gold producer deals last year, 4.4% less than 2012, and the lowest total since 2004. A pickup in activity, however, was seen in December, with both Goldcorp (GG -0.9%) and Newmont Mining (NEM -1.7%) saying they're looking to add low-cost operations.
  • “Majors who have done portfolio optimization will look at some of the juniors and say, ‘Here’s a chance for us to acquire a potentially better asset than we’ve sold and to mitigate the loss of production,’” says Barclays' Paul Knight.
  • Possible targets might include single-project developers like Pretium Resources (PVG) and Torex Gold (TORXF +5.3%).
  • Thanks to a regime of cost cuts, the 10 largest producers - led by Barrick Gold (ABX -1.7%) - should have some firepower, maybe generating $4.17B of free cash flow this year vs. a negative $1.74B in 2013, says Bloomberg. At the same time, exploration and development companies - who rely on regular financings - have good incentive to sell. “Darwinism is alive and well in the gold industry right now,” says Fidelity's Joe Wickwire. "While ultimately there will be fewer companies producing less gold, “the profitability of the industry is going to go up.”
  • ETFs: GDX, GDXJ, NUGT, DUST, GLDX, RING, GGGG, JNUG, PSAU, JDST
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Comments (4)
  • 6151621
    , contributor
    Comments (1174) | Send Message
     
    >>While ultimately there will be fewer companies producing less gold, “the profitability of the industry is going to go up.<<

     

    If this is right than GDX should outperform gold even if the price drifts lower or sideways. I've thought this is possible but not likely. Anyway, brokers want you to trade so they never have a shortage of trade ideas.
    8 Jan, 02:39 PM Reply Like
  • TDWelander
    , contributor
    Comments (639) | Send Message
     
    To 6151621. Yes sir. I believe this is the first time a hidden number person has
    had a credible comment in my experience. Fewer gold companies producing
    less gold and profitability up. Absolutely the best bet without some kind of
    market upset; such as supply chain disruptions.

     

    Brokers get squeezed in downward demand markets because of a smaller
    supply and suppliers preferring to sell direct eliminating the middle man
    and their cut. So you can probably look to fewer middle men also not
    being able to find a supply of gold unless some kind of short term gold glut
    occurs.

     

    A gold glut seems unlikely except with all of the production over the last
    several years, a short term glut may now be possible where it was not
    before. China and India and others are savy to downward price spikes
    due to temporary over supply. China in particular I believe has a long
    term plan to eventually own more gold than any other country on the
    planet; which is a very large amount of gold. Actual quantities I have
    read are available at the World Gold Council web site documents.
    8 Jan, 03:27 PM Reply Like
  • 6151621
    , contributor
    Comments (1174) | Send Message
     
    Some people with numbers do it because their employer would not let them comment on stocks and such so you should give us a chance. For me, I think the number is a good enough identity. Many write back with @615 and that's good too. It's like a first name. But if you think this means identity unknown then read this: http://bit.ly/1a1cCNe
    8 Jan, 03:37 PM Reply Like
  • james.
    , contributor
    Comments (298) | Send Message
     
    In Dec 2013, NEM sold its Midas Mine & Mill to Klondex for $83 Million Cash plus 5 million Warrants on Klondex Stock; a NEM VP Executive said this sale will close in early 2014, and was a "Portfolio Adjustment", since Midas Mines had only a few more years; Klondex said it plans to alter the Midas Mine to hopefully extend it for 20 more years of production. So this is a win-win situation for both companies ! Jan 8, 2014 at 2:31 pm PST.
    8 Jan, 05:32 PM Reply Like
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