Evolution boss Jake Klein has said his cashed-up company is looking to North America for potential acquisitions.
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The global value of financial deals in the mining industry fell by almost 15 per cent in 2018 despite an overall increase in mergers and acquisitions, according to research from GlobalData.
Just over half (50.9 per cent) of the $US114 billion ($158.5 billion) value recorded for the year was the result of mergers and acquisitions.
GlobalData stated that the primary reason for the dip was a fall in capital raising through equity and debt offerings and a lower rate of acquisitions. Capital raising activities accounted for the remaining 49.1 per cent of value.
Out of 3000 mining deals in 2018, just five accounted for 15.8 per cent of global deal value. Each of these five deals were worth over $US2 billion each, with the largest being Tianqi Lithium’s acquisition of 23.77 per cent of Sociedad Química y Minera (SQM) for $US4.1 billion.
Despite the drop in global mining deal value, mining, energy and utilities were all cited as top contributors to a national mergers and acquisitions record in Australia last year, particularly in the mid-market sector (defined as deals between $10 million and $250 million in value).
Headline examples of mining merger and acquisition deals include OZ Minerals’ acquisition of Avanco ($418 million), South32’s acquisition of Arizona Mining ($1.8 billion) and Ausdrill’s acquisition of Barminco ($271.5 million).
The five largest countries in terms of deal value were China, Canada, Australia, the United States and Indonesia, which collectively accounted for 65.2 per cent ($US74.5 billion) of global mining deal value for the year.
Zak Mir: Small Cap Highlight ECR Minerals #ECR – Gold back in the spotlight as slowing global economic growth spikes renewed appetite
By Zak Mir, Financial Journalist
- Positive forecast for gold prices
- Australia Gold production ramp-up
- MicroCap Australian Gold explorer focus
Positive forecast for gold prices
Sharp declines in global stock markets over the past few weeks saw Gold hit a three month high as political uncertainty continues to grow across the world.
In August prices for the precious metal fell below $1,200 per troy ounce mark for the first time in more than two and a half years’, down 12% since April. The turn largely caused by the US Dollars unexpected performance and aggressive monetary policy marked it’s worst losing streak since 2013.
However, October has seen a marked turnaround in the Gold price: the yellow metal grew by 3.3% in October, and continuing into November saw $1,233 per ounce as investors and hedge funds continue selling off global equities in search of reduced risk amidst geopolitical and economic uncertainty. Safe haven demand for gold has been driven by ongoing fears of a trade war between the US and China, growth concerns in China and the ongoing Brexit saga amongst a number of other issues.
Observers have been universal in their support. Mark O’Byrne, research director at Dublin-based GoldCore said: “Safe-haven gold is again acting as a hedge and safe-haven asset, exactly when investors need one.” “Throughout its history, Gold has served as a stable, safe haven investment during times of economic slowdown and following the International Monetary Fund (IMF) downward revision of the global economic growth for next year we might see more investors buying up the commodity.”
Others have noted how the nature of intra-year seasonal cycles may are likely to lead to increase in the price of gold. The Street says “massive washouts like the one we’re experiencing in gold right now are the fathers of subsequent rallies”.
Speaking on the Bloomberg Markets podcast Ruth Crowell CEO of the London Bullion Market Association discussed how the groups Annual Gathering this year predicted the most bullish forecast since 2012 with a forecast of $1,585 per ounce for next October. Ruth explains that this years price is reflected by ‘the macroeconomic outlook, ultimately talking about a lot of concerns’. Meanwhile a poll conducted by Reuters this month they found that of the 39 analysts and traders polled they expected gold prices to average $1,300 an ounce in 2019.
Australia Production Ramp Up
On the supply front, according to Bloomberg the world’s largest miners look set to increase spending for the first time since 2013 while the value of sector M&A activity has hit the highest levels in six years.
As a result, Gold production looks to set for further ramp ups through the end of 2018 and into 2019.
In particular production in Australia, the world’s second-largest Gold producer, may rise to a record this year and next as a stream of new projects come on line. Comments from Australian mining consultancy Surbiton Associates in the Sydney Morning Herald highlighted how Australian gold miners, among the lowest cost globally, have enjoyed high margins in recent years, with output boosted by the strengthening US dollar, which has in turn ‘supercharged’ Australian dollar prices.
MicroCap Australian Gold explorer focus – ECR Minerals
While the giants such as Newcrest Mining, AngloGold, Newmont Mining and Barrick Gold Corp tend to dominate the headlines, this upturn in sector activity has seen a marked increase in funding for small and microcap Gold exploration companies. Following a strategic financing round in July 2018, microcap Gold exploration company ECR Minerals has delivered a steady stream of exploration news updates, which has resonated among institutional and retail investors during Q3. ECR are conducting exploration activities across their numerous projects in Victoria, which is by far the most accessible and productive area of gold in Australia. In the 70 or so years from the 1850’s until the 1920’s, approximately 2,100 tons of officially recorded gold was recovered from Victoria and today it continues to be a favourite area for metal detector prospecting.
Listed on London’s AIM market, ECR’s exploration projects underway include Avoca, Bailieston, Moormbool and Timor gold projects in Central Victoria.
In mid September, ECR announced that it had ‘identified eight principle targets within the Company’s five exploration licence areas’ and had developed an exploration programme ‘designed to test surface gold mineralisation across the licence areas.’
At the end of September the Company confirmed gold mineralisation, with 22 samples from 76 containing gold grades ranging from 0.5 g/t to 67.4 g/t (2.17 ounces per ton). Their second assay results proved positive too, with 29 samples delivering gold mineralisation ranging from 0.56 g/t Au to 22.9 g/t Au;
ECR’s next rock chip sampling results will come from the Creswick area, where prior mapping has revealed a large gold system. Sounds promising.
So whether you’re buying bullion, investing into Gold majors as a proxy for the yellow metal or speculating on Microcap Gold explorers, the shiny near term outlook for Gold, and in particular Gold explorers operating in Australia looks unlikely to be tarnished
Australian Financial Review: Gold executives see M&A as inevitable as Diggers and Dealers kicks off – ECR Minerals #ECR
The Australian gold industry is primed for a surge in mergers and acquisitions as cashed-up miners look to buttress their reserves of the precious metal as this week’s Diggers and Dealers conference in Kalgoorlie brings together some of the industry’s biggest deal makers.
Increased gold production has swelled the cash flows of Australian gold miners even as the US-dollar gold price has tumbled towards $US1200 an ounce, providing many with the financial firepower needed to pursue acquisitions at a time when some industry leaders are concerned about “peak gold” given the pressure on reserves and a dearth of significant new discoveries.
“Everyone can see Aussie producers generating more and more cash and I haven’t seen evidence of them paying higher dividends to shareholders,” said Gold Road managing director Ian Murray amid a resurgence in the broader mining industry that has added a sense of anticipation to the three-day Diggers and Dealers event, which will host the largest number of delegates since 2012.
Mr Murray said Australian producers considered local assets expensive, fuelling speculation they are eying overseas assets.
Referring to the exploration program, he said: “We will look at M&A when there is something logical which is a bolt on. The actual producing space is difficult.”
The Gold Road-Gold Fields’ Gruyere joint venture is set to pour first gold in the June quarter after a $621 million investment in developing the mine, which sits in the Yamarma belt about 200 kilometres north-east of Laverton.
Potential peak gold
Gruyere, with a 6 million ounce ore body, and the Tropicana joint venture between AngloGold Ashanti and the Independence Group, about 150 kilometres to the south, are considered the two most significant greenfields gold projects in Australia in almost two decades.
Gruyere is forecast to produce 270,000 ounces of gold a year from open cut operations with a 13-year mine life.
Mr Murray added his voice to those declaring that global gold production has peaked, noting a dramatic fall in South African production and a dearth of new discoveries.
“Gold production comes from new discoveries. What big discoveries have been made? The big gold discoveries have dried up,” he said.
Northern Star Resources boss Bill Beament is among those convinced global gold production has peaked, pointing to the declining production profiles and reserves of the world’s biggest gold miners.
“This year, maybe even last year, probably saw the peak of gold production,” he said.
“That has to be the case because if you look at the top end of town, their production forecasts are only going one way and you can’t see it coming back because their reserves are also declining.”
World Gold Council (WGC) chairman Randall Oliphant, Goldcorp chairman Ian Telfer and other industry leaders have made the same call over the past 12 months after decades of steady increase. Industry giants Goldcorp, Barrick and Newmont have all seen their production decline.
However, WGC analysis shows mine production grew 3 per cent in the second quarter of 2018 to 836 tonnes as projects in Russia, Indonesia and Canada continued to ramp up.
Mr Beament is encouraged by the level of greenfields exploration by smaller companies but believes the future for gold in Australia, where Northern Star and others have grown production and reserves around existing mines, is all underground as open pit production winds down.
“Australia’s got a lot more gold to yield but if you fast forward a decade, the only large scale open pit still running is probably going to be Boddington,” he said.
“If you go back 40 years, it was all underground mining until the advent of CIL and CIP processing technology. We’re going to go back the other way.
“This transition from open pit to underground in the next decade will be the biggest transition for any sector.”
Mr Beament said the Australian gold sector was on a strong footing going into Diggers and Dealers despite a recent softening in price. The annual conference starts today and has attracted 2300 delegates for the first time since 2012 amid in wide-ranging resurgence in mining.
Mr Beament said the successful industry-led campaign to block a WA government gold royalty hike last year been vindicated by huge expenditure on exploration and despite Treasurer Ben Wyatt continuing to use social media to niggle at some of the companies involved.
A host of companies with mines or mining tenements in WA have increased their exploration budgets for 2018-19, including Northern Star committing a company record $60 million to its ground in the Goldfields.
“I’m spending record money because I’m not paying that extra tax, so I’m generating a hell of a lot more jobs, finding a lot more gold and the state’s going to get a lot more royalties from that in the future,” Mr Beament said.
“We’ve got the money to do that because WA didn’t bring in that stupid tax increase last year.”
Rising demand factors
Mr Wyatt said no one was happier than him to see the gold industry doing well, but refused to let the royalty issue die.
“All we’ve ever asked the gold sector to do is pay a return to the WA community that is commensurate with that paid by other commodities like nickel, copper and iron ore,” he said.
Deloitte research shows the combined value of WA-based listed companies increased by almost 27 per cent to $193.5 billion in 2017-18.
It is the first time the Deloitte WA Index has been above $190 billion since 2011 and comes off the back of two years of growth.
Deloitte WA assurance and advisory partner Dave Andrews said the revival was spearheaded by strong prices for LNG, crude oil and thermal coal.
“Additionally, battery metals, particularly nickel, cobalt and copper, and rare earths showed strong momentum on the excitement surrounding battery storage demand, the expanding electric vehicle market, renewables, and our hunger for more and more consumer technology,” he said.
Mr Andrews said numerous companies on Deloitte’s WA Index with exposure to those commodities and industries delivered exceptional returns for shareholders in 2017-18.
“If you look at the composition of the higher end of our index today compared to 2011 when it was last over $190 billion, the likes of Pilbara Minerals, Galaxy and Lynas Corporation didn’t feature,” he said.
“And the likes of gold plays Northern Star, Regis and Saracen are now significant contributors to the index.”
Mr Mathews said the gold industry faced labour cost pressures given rise in mining across a range of commodities.
“Gold has been going pretty well but now almost every commodity is going up,” he said. “People are going to be competing for the same talent.”