MELBOURNE/LONDON, April 18 (Reuters) – The collapse in bullion prices is set to rekindle gold mining takeovers as Chinese companies, sovereign wealth funds and private equity and hedge funds step in to rescue cash-strapped small and mid-sized miners.
Gold miners in China, the world’s biggest producer, have been chasing mines and listed companies in a bid to grow and match the largest global producers, like Barrick Gold Corp .
A seven-fold rise in gold prices between 2001 and 2011 spurred a run of gold mergers and acquisitions. Activity fell last year as major miners digested some big buys and smaller players held out for better offers, with global gold M&A tumbling to $14.6 billion from $43.3 billion in 2011, according to Ernst & Young.
But that is expected to pick up again this year as a 15 percent plunge in gold prices this month forces smaller miners, especially those with high-cost production or single assets, to seek partners to stave off a cash crunch.
“This might be the final shoe to drop that makes some people think ‘there’s no way I’m able to finance myself going forward, so I’ve got to think more seriously about my investors and give my investors a return by putting things together with people that have … got the cash’,” John McGloin, executive chairman of Africa-focused miner Amara Mining, told Reuters.
With major gold miners like Barrick Gold and Newcrest Mining under pressure to rein in capital spending, slash costs and fix mine problems, they are more likely to be spinning off assets rather than chasing acquisitions.
That leaves the door open to the Chinese, as well as cashed up sovereign wealth funds and private equity and hedge funds, to fill the gap.
“With things so badly beaten up, it is an opportunity (for Chinese companies), who will only have one or two other bidders for any asset,” said an adviser familiar with the sector.
TARGETS IN FRAME
China’s top gold producer, Zijin Mining and state-owned Shandong Gold Group have been leading the expansion push.
Zijin won control over small producer Norton Gold Fields in Australia last year for $240 million and on Wednesday made a A$13 million bid for explorer Kalgoorlie Mining Co.
Norton Gold Fields chief executive Dianmin Chen, a Zijin appointee, said the company was looking at further takeovers to consolidate gold miners in Australia, and was also open to buying assets outside Australia.
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