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Gold miners get their mojo back as giant deals revive allure

Feb 05 2019 06:30
Thomas Biesheuvel, Bloomberg

After years on the sidelines, gold producers are suddenly the mining world’s hottest topic as the industry gathers in Cape Town this week.

For more than half a decade, gold miners have been stuck in the doldrums, shunned by investors following a string of missteps and bogged down by a stagnant bullion price. Then, in September, a surprise mega deal turned the industry on its head.

Barrick Gold's $5.4 billion purchase of Randgold Resources set off a chain reaction that led to Newmont Mining’s $10 billion deal for Canada’s Goldcorp last month.

The flurry of activity –  which coincided with a late-2018 surge in bullion prices –  has re-ignited interest in gold, throwing the whole industry into a thrall of speculation over who might be next.

“It’s an exciting time to be a gold miner,” said Martin Horgan, the chief executive officer of Toro Gold, who arrived in Cape Town this weekend.

Horgan said while specialist funds have remained supportive of profitable companies, he sees the resurgent gold price drawing generalists back to the sector.

As thousands of executives, investors and bankers fly in to Cape Town for the annual Mining Indaba conference, one of the big themes for the week is likely to be the future of South Africa’s own gold mining industry.

The country’s gold output fell for a 14th straight month in November as the sector grapples with cost pressures, geological challenges and labor disputes. The biggest Johannesburg-based producer, AngloGold Ashanti, is currently considering a London listing and exiting its last South African gold projects, people familiar with the matter said in December.

Further afield, analysts have tapped companies from Kinross Gold to Iamgold Corp. and Australia’s Newcrest Mining as names to watch amid expectations that the wave of deals has further to run. 

Gold equities have also been boosted by a rebound in bullion. The metal’s impressive December rally has carried over into 2019 as concerns stack up about slowing global growth and holdings in exchange-traded funds continue to expand.

For the wider mining industry, the excitement around gold has served as a shot in the arm at a time when big diversified producers are veering away from dealmaking fireworks in favor of asset sales, cost cutting and shareholder returns.

It’s also a boon for the Mining Indaba. In recent years, the largest global producers have had a shrinking public presence at the conference, with no sign of executives from Glencore or BHP Group and a reduced role from Rio Tinto Group.

Only Anglo American, the century-old miner built on South Africa’s natural resources, is sending its chief executive officer this year. The company also hosts the official dinner at its 300 year-old Vergelegen wine estate, an hour’s drive from Cape Town.

The gold industry, however, is showing up in numbers. Barrick’s new South African boss Mark Bristow and AngloGold chief Kelvin Dushnisky are both on the conference program, while Newmont is sending its external-relations head.

“We are seeing more interest in gold names and more incoming calls after a poor performing 2018,” said Credit Suisse Group. “Mergers have rekindled near-term interest in the sector, along with rising gold.”

mining indaba  |  miningindaba2019  |  gold  |  mining
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