U.S. Global Investors: Is This The Start of a New Golden Age of Gold Mining Deals?
Gold prices are back over $2,000 per ounce, close to the record highs set in mid-2020. Gold developers looking to increase their reserves may look towards acquiring smaller companies with promising new developments.
But even big players are getting in on the game. Newmont (NEM) made an offer to buy Newcrest Mining (NCMGF) for $19.5 billion. And that’s after the initial offer of $17 billion was rejected.
Of the 10 largest proposed or completed deals in the mining space, 3 have taken place in the past year. The last big cluster of activity occurred in the mid-2000s amid the peak of the commodity boom.
Gold mining deals could create value for buyers of smaller gold companies. That’s because this industry is highly fragmented, with the top 10 producers bringing 28 percent of total supply. In other metals industries, the top 10 players bring in closer to 50 percent of the total supply.
Much like the energy industry, the big players haven’t been spending money on developing new properties. To replace aging mines and declining reserves, an acquisition of proven resources is the likely way the big players will solve that problem.
Add in a rising interest in gold as an investment right now, and it could be an excellent time to buy smaller companies in the space.