How Aussie Gold Miners are Thinking About M&A
Will the strong run of deals in the Australian gold space continue?
It’s been an active year for deals in the Australian gold space, a trend that is likely to continue.
Australia’s largest listed gold producer, Northern Star Resources (ASX: NST), recently completed the A$6 billion acquisition of De Grey Mining, making it the new owner of the coveted Hemi development asset in Western Australia’s Pilbara region.
In the past three weeks, Ramelius Resources’ (ASX: RMS) has completed the A$2.4 billion takeover of Spartan Resources, while Alkane Resources (ASX: ALK) closed a merger with Toronto-listed Mandalay Resources Corporation.
Gold Fields (JSE: GFI) is set to complete the acquisition of Gold Road Resources (ASX: GOR) next month to consolidate the ownership of the Gruyere gold mine in WA.
Capricorn Metals (ASX: CMM) recently announced the A$188 million acquisition of explorer Warriedar Resources (ASX: WA8) to consolidate the ground around its Mt Gibson development project in WA.
Emerging gold producer Brightstar Resources (ASX: BTR) just announced the latest in a spree of transactions with an agreement to acquire Aurumin (ASX: AUN) to grow its land position in the Sandstone gold district in WA.
At the asset level, Greatland Gold (AIM/ASX: GGP) acquired Newmont Corporation’s (NYSE: NEM) Telfer mine and Havieron project, while Genesis Minerals (ASX: GMD) recently paid A$250 million for Focus Minerals’ (ASX: FML) Laverton project.
Minerals 260 (ASX: MI6) paid Zijin Mining (SSE: 601899) A$166.5 million for the Bullabulling development project, while Catalyst Metals (ASX: CYL) paid copper producer Sandfire Resources (ASX: SFR) A$32.5 million for the Old Highway gold project in WA.
More to come?
“Going back a few months, I would have said that perhaps things were a bit hot and elevated, but there's been a lot of retraction in equities, and I think, if anything, that that motivates the catalyst for more M&A,” Northern Star managing director Stuart Tonkin said during a site visit to the company’s KCGM asset this month.
“Northern Star’s obviously just done De Grey, and we're integrating, and we're building things and we've got our own pathway set, but I think in the junior end of town, you'll see a lot more of that positioning and perhaps co-operation.”
Westgold Resources (ASX: WGX) managing director Wayne Bramwell also expects to see more activity among smaller companies.
“I think the whole M&A thematic will just keep going, and it may drop down, and you're already seeing it some sense,” he said on the sidelines of the Diggers & Dealers Mining Forum in Kalgoorlie this month.
“Now you're seeing things like Alkane, the next tier down. Today, you're seeing activity around some of the juniors … so I think it will continue to keep going.”
Ramelius boss Mark Zeptner suggested there may be a bit of a pause after a flurry of deals so far this year.
“Now, there is a school of thought that you shouldn't do deals at the top of the gold price. I probably believe you do them when you can, and as long as you're applying reasonable gold prices in your assumptions, you do them when you can, otherwise, you might be waiting a long time for a gold price low,” he said.
“I've said that before, so who knows whether there's been a bit of a wave and we have a bit of a lull now.”
Ramelius first bought a stake in Spartan in July 2024 and Zeptner said the company spent some time understanding the value.
As a result, the company paid a lot more than what it would have a year ago.
“We've always tried to get our head around value. We've never gone really early on a few [drill] holes,” Zeptner said.
“We probably leave it later than maybe some would like, but that means that we don't go too early on something that doesn't turn into something.”
Former Spartan managing director Simon Lawson has joined Ramelius as deputy chairman.
“I'm not going to put words in Mark's mouth, but I think Ramelius is just going to be sitting, watching what's going on and focusing on its knitting,” he said.
“I think maybe the combination has actually made Ramelius a bit of a target for bigger players.”
Gold Fields has said it’s keen to continue to grow in Australia, while Agnico Eagle Mines (TSX: AEM) has stepped up its business development activities in Australia recently.
The right time?
Evolution Mining (ASX: EVN) CEO Lawrie Conway was clear that the company was planning to “bank the upside” of the higher gold price.
“I think it's fair to say what we've said for the last 12 months, that there's time to do deals and there's time to make money, and right now it's time to make money,” he said.
“We made A$1700 an ounce net just in the June quarter, and that was still at A$300-400 an ounce below the [current] gold price.”
However, Conway acknowledged that it was hard to know what the gold price would do given its record run.
“If you look at the assets that Newmont sold in North America late last year, people thought [the buyers] paid too much, and were they buying at the gold price high? But the gold price has moved up 30% since then,” he said.
“Our view is, there will be an asset that's for us and a good fit for us at the right time. Right now, there's nothing that we're seeing in the market that fits with us.”
Regis Resources (ASX: RRL) managing director Jim Beyer joked that if he knew what the gold price was doing he would be “dealing in futures and living on a A$2 billion yacht somewhere”.
“I think at the end of the day, regardless of what the gold price is doing, there are people within the industry that are always looking for opportunities,” he said.
“When the gold price is high, there are some opportunities you’ve got to be careful, because when the tide goes out, you need to make sure you're well covered, but opportunities for deals and M&A exist, I think, at all spectrums.
“Again, it's just how disciplined you want to be, and whether your focus is on growth for growth’s sake or value growth for your shareholders.”
Race to stay relevant
The gap between Australia’s largest gold producer, A$26 billion Northern Star, and A$16 billion Evolution has gotten wider in recent years, while the gap between Evolution and the rest of the mid-tier pack has also expanded.
Bramwell pointed out that Regis was the only mid-tier producer not to enter into a big transaction in the past 18 months, though it’s been linked to a number of things via the rumour mill, including Bellevue Gold (ASX: BGL), which has a data room open.
The most recent speculation this week was that the company was in talks to buy partner AngloGold Ashanti’s (NYSE: AU) 70% stake in the Tropicana gold mine in WA.
In a statement to the ASX, Regis said it was not in “advanced discussions” with respect to any specific opportunity.
Two weeks ago, Regis’ Beyer said the company was keen on growth and would look at adding a development project or operating asset.
“We just look at it all and see what's right and what we think is reasonable value for our shareholders,” he said.
“Every decision that we make is underpinned by, is it value-accretive for our shareholders?”
While Vault Minerals (ASX: VAU) has been touted as a possible target for larger rival Genesis, head of corporate development Len Eldridge said the company was very much focused on organic growth at its King of the Hills operation in WA.
“For us, from a protagonist, cash-led M&A perspective, I'm not sure the value is there for us at this point in time, because we've got life in our business, so it allows us to execute on the plans,” he said.
He said the company was undervalued, which would start to change as its hedging contracts rolled off and its plant expansion at King of the Hills was realised.
“From our perspective, we've got a lot on our plate in terms of opportunities in the business and I do think we've got the most compelling value proposition in the sector today.”
What about selling?
It has been speculated that Northern Star may look to offload its smaller Carosue Dam operation in WA or Pogo mine in Alaska.
“Our attitude is that all the assets we're using today, they're in our guidance, and they're generating good cash,” Tonkin said.
“It doesn't mean that in the future, we won't own these things, but that could be five years, 10 years down the track.
“We've always rationalised and simplified the portfolio, but at the moment, I'm not sure who's out there looking and buying.”
Similarly, it’s been suggested that Evolution could be a seller of its sole WA asset, Mungari, or its underperforming Red Lake operation in Canada.
Evolution just completed a plant expansion at Mungari to take production from 130,000 ounces per annum to 200,000ozpa and Conway suggested there would be “mutiny” from the team if the company looked to sell it.
“[If it’s] making a margin of A$2500 an ounce, that's A$500 million cashflow. Multiply that by five, if someone's got a check for about A$1.5-2 billion, then we're obliged to think about it … but I don't see anyone out there at the moment,” he said.
“Red Lake now is just starting to really operate the way we wanted it to, and we've got a 17-year mine life there, and if it can keep doing that, it has a role to play, because of what we see as the exploration upside around there.
“I think if you look at it, the prices that Newmont got for their assets, that does make it a little bit attractive, but I think we've still got a good opportunity to really maximise what we get out of Red Lake.”