Categories: General Market Commentary / Precious Metals
Topics: General Market Commentary / General Precious Metals

Cashed-Up Australian Gold Miners Set to Take Deals Global

  • Northern Star, Evolution Mining could weigh overseas mergers
  • Nation’s top producers have tripled cash pile in two years

Australia’s top gold producers are set to take their $5 billion acquisition spree global to secure growth as domestic opportunities fade and bullion’s gains swell their cash piles.

Companies including Evolution Mining Ltd. and Northern Star Resources Ltd., Australia’s No. 2 and No. 3 producers, may be required to look to the U.S. and Canada for acquisitions to add operations of sufficient scale and quality, according to Global Mining Research Ltd.

“You have to improve your portfolio and there’s not a lot here that’s left,” Sydney-based Global Mining executive director David Cotterell said by phone. “If you want to go a bit further afield and want to keep the risk profile similar, then you need to target North America.”

Gold companies based in Australia have proposed or completed acquisitions worth about $4.5 billion since a rebound in deal-making in 2015, though the value of deals so far this year has slowed to just $198 million, according to data complied by Bloomberg. There’s a lack of quality targets and producers have chosen to use cash to fund internal growth options, according to Argonaut Securities Ltd.

 

Global gold deals have also slowed, declining to $19.8 billion in 2016 from $22.8 billion a year earlier, the data shows, and Australian companies going offshore may help bolster the deal market, according Global Mining’s Cotterell. “North Americans are largely focused on their balance sheets and internal issues -- where we are going to see interest is from the Australia space,” he said.

Evolution, Northern Star and other Australian miners could consider potential mergers with companies of a similar size based in Canada or the U.S. to build scale and add top-quality operations, according to Global Mining and Argonaut.

Northern Star gained 0.6 percent Friday in Sydney, while Evolution was unchanged.

Executives from Northern Star and Evolution are scheduled Monday to address the annual three-day Diggers and Dealers conference in Kalgoorlie, Western Australia, where more than 2,000 delegates will gather for presentations from about 50 minerals and metals producers, also including BHP Billiton Ltd., Anglo American Plc and Gold Fields Ltd.

“We would consider an asset outside of Australia if the right opportunity presented,” Evolution’s Executive Chairman Jake Klein said in an emailed statement. Australia remains the key focus for Evolution, which operates six mines in the country and also has an interest in a Glencore Plc-run mine, he said.

Evolution, which has completed about $1.5 billion of deals since 2015, on Friday agreed to invest A$2.5 million ($2 million) in a planned initial public offering of Riversgold Ltd., with exploration projects in locations including Alaska, the Sydney-based producer said in a filing Friday. Northern Star declined to comment on its business development plans.

Bullion has advanced about 12 percent on haven demand since touching a 10-month low in December. The metal averaged about $1,239.41 an ounce in the six months to June 30, according to Bloomberg generic pricing.

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