Senior Gold Producers Remain Cautious on M&A
What are the big miners going to do with all that cash?
Margins in the gold sector are growing, thanks to the strong price, but it seems the big miners are more likely to be sellers than buyers in this market.
Newmont Corporation (NYSE: NEM) has spent much of the past year divesting assets as part of the streamlining of its portfolio following the acquisition of Newcrest Mining.
On Monday, the company announced the sale of its Coffee development project in Yukon, Canada, to Fuerte Metals Corporation for up to US$150 million.
Since mid-2024, Newmont has sold six operating assets and two projects, completing its divestment process.
On Friday, Newmont also disposed of its equity stake in Orla Mining (TSX: OLA) for gross proceeds of US$439 million, which follows Agnico Eagle Mines’ (TSX: AEM) sale of its own Orla stake earlier this month.
Meanwhile, Barrick Mining Corporation (NYSE: B) has also been a seller of assets.
In April, the company sold its 50% stake in the large undeveloped Donlin gold project in Alaska to affiliates of Paulson Advisers and NOVAGOLD Resources Inc (TSX: NG) for US$1 billion in cash.
Earlier this month, Barrick sold its Hemlo mine in Canada to Carcetti Capital Corp for up to US$1.09 billion.
More sales to come?
One miner that is set to be a seller is AngloGold Ashanti (NYSE: AU).
“You can see we're very busy in the BD space, selling more than buying,” AngloGold CEO Alberto Calderon told the Mining Forum Americas this week.
“We're selling assets that are not tier one.”
The company offloaded the Doropo project to Resolute Mining (ASX: RSG) for US$175 million and is selling the Serra Grande project in Brazil to Aura Minerals (Nasdaq: AUGO) for US$76 million and a 3% net smelter return royalty.
Calderon said the company was advancing the sale of Cerro Vanguardia in Argentina.
“There was the worst-kept secret in the industry in Australia, that we were trying to sell Tropicana,” he said.
Regis Resources (ASX: RRL) owns a 30% minority share in the Tropicana gold mine in Australia and has a pre-emptive right over the remaining 70%.
“We did have conversations. It's a very good asset for still two or three years, but then it'll be probably better in other hands, so at some point, strategically, we will sell Tropicana, but we don't know when, because the next three years are still very good,” Calderon said.
Calderon said Tropicana and the Sunrise Dam mine in Australia remained important parts of the portfolio and the company was a “happy player” in Africa.
“I think we're very good at operating in Africa, but you need to strike a balance, so we look at things in the US, we look at things in Canada, we look at things in other nations, and we'd like to strike that balance,” he said.
“But we'd like to ideally substitute Tropicana for something in the developed world.
“Australia is a good place, but probably a very expensive place. There's nowhere cheap, but probably Australia’s out of the market right now.”
Organic growth focus
The focus of Barrick and Agnico Eagle’s presentations was very much organic growth and both alluded to keeping calm in the current gold price environment.
Barrick CEO Mark Bristow said that “in times like these, there’s always temptation for short-term gratification”.
Bristow used the bulk of his presentation to the Mining Forum Americas to reveal some early numbers around the “generational” Fourmile discovery in Nevada.
“Our growth is organic, built around tier one assets and underpinned by disciplined capital allocation,” he said.
“Few companies in this industry can match the depth or quality of what [we have].”
Barrick is undertaking an expansion at its Lumwana copper mine in Zambia and progressing the large Reko Diq project in Pakistan.
“These projects underpin more than 30% growth in gold equivalent ounces by 2029,” Bristow said, adding that Fourmile was not yet in the outlook.
Meanwhile, Agnico Eagle CEO Ammar Al-Joundi stressed that the company was going to stay focused.
“We're going to stick to what we do well. We're not going to do anything crazy,” he said.
Al-Joundi said the company had already invested around US$1 billion back into the business this year, which includes the sector’s largest exploration budget.
“We have the best pipeline we've ever had, and, and we have the best exploration results we've ever had,” he said.
The company has five organic growth projects, including the expansion of Detour and Malartic in Canada to more than 1 million ounces per year of production.
“In the world, depending on the year, there are 4-5 mines that produce over a million ounces a year,” Al-Joundi said.
“One's in Russia, Uzbekistan, Indonesia, and sometimes Kazakhstan. The only one in the world producing more than a million ounces a year in the Western World is Nevada Gold Mines.
“So by bringing Detour and Malartic to over a million ounces a year, we will have two of six mines in the world producing over a million ounces a year, two of three in the Western world, and these are multi-decade mines with mine lives well into the 2050s.”
Open to M&A
Other large companies, including Kinross Gold (TSX: K), Gold Fields (JSE: GFI) and Lundin Gold (TSX: LUG) seemed more open to deals.
Northern Star Resources (ASX: NST) just completed one of the bigger deals of this year with the A$6 billion takeover of De Grey Mining.
Kinross CEO Paul Rollinson pointed out that the company had only done three deals in the past decade.
“We look and if there was something compelling, like a Great Bear, we'd do it, but we don't feel under any pressure,” he said.
“Obviously, our balance sheet is great, our development pipeline is great, lots of visibility in production out through the end of the decade, so we don't feel under any pressure to do M&A.”
Gold Fields CEO Mike Fraser said the company had three levers to improve the quality of the portfolio: M&A, brownfields exploration and greenfields exploration.
The company is set to complete the A$3.7 billion acquisition of Gold Road Resources (ASX: GOR) next week to consolidate ownership of the Gruyere mine in Western Australia.
“I always say M&A is opportunistic. You can't build a strategy around it,” Fraser said.
“But what we will continue to do is to look at opportunities to bring higher quality assets into the portfolio.
“We aren't particularly focused on producing assets – that's not what we're about. This is not about size for size sake, but where we can identify more advanced projects that build into our pipeline for the longer term.”
Meanwhile, Lundin is generating strong cash from its sole asset, Fruta del Norte in Ecuador.
Lundin CEO Ron Hochstein said having a strong balance sheet was important.
“We can do M&A and increase our equity if we want to still maintain that dividend,” he said.
“Obviously, we also just don't want to sit on and file the cash. We want to have cash to enable us to pursue growth but not have excess cash.”