Australia’s top gold producers are set to take their US$5 billion acquisition spree global to secure growth as domestic opportunities fade and bullion’s gains swell their cash piles.
Companies including Evolution Mining Ltd and Northern Star Resources Ltd, Australia’s No. 2 and No. 3 producers, might be required to look to the US and Canada for acquisitions to add operations of sufficient scale and quality, Global Mining Research Ltd said.
“You have to improve your portfolio and there’s not a lot here that’s left,” Sydney-based Global Mining executive director David Cotterell said by telephone. “If you want to go a bit further afield and want to keep the risk profile similar, then you need to target North America.”
Gold companies based in Australia have proposed or completed acquisitions worth about US$4.5 billion since a dealmaking rebound in 2015, although the value of deals so far this year has slowed to just US$198 million, according to data complied by Bloomberg.
There is a lack of quality targets and producers have chosen to use cash to fund internal growth options, Argonaut Securities Ltd said.
Global gold deals have also slowed, declining to US$19.8 billion last year from US$22.8 billion a year earlier, the data show, and Australian companies going offshore might help bolster the deal market, Cotterell said.
“North Americans are largely focused on their balance sheets and internal issues — where we are going to see interest is from the Australia space,” he said.
Evolution, Northern Star and other Australian miners could consider potential mergers with companies of a similar size based in Canada or the US to build scale and add top-quality operations, Global Mining and Argonaut said.
Northern Star yesterday gained 0.6 percent in Sydney, while Evolution was unchanged.
“We would consider an asset outside of Australia if the right opportunity presented,” Evolution’s executive chairman Jake Klein said in an e-mailed statement.
Australia remains the key focus for Evolution, which operates six mines in the country and also has an interest in a Glencore PLC-run mine, he said.
Evolution, which has completed about US$1.5 billion worth of deals since 2015, yesterday agreed to invest A$2.5 million (US$2 million) in a planned initial public offering of Riversgold Ltd, with exploration projects in locations including Alaska, the Sydney-based producer said in a filing.
Bullion has advanced about 12 percent on haven demand since touching a 10-month low in December last year.
The metal averaged about US$1,239.41 an ounce in the six months to June 30, according to Bloomberg generic pricing.
Australia’s 10 largest gold producers more than tripled their cash pile in the two years to Dec. 31 last year to about A$1.4 billion from A$406 million, according to data compiled by Bloomberg.
A number of mid-tier producers are building significant levels of cash and are free of major capital expenditure commitments, Argonaut said.
“They are all cash building, as they can’t find the right assets,” Perth-based Argonaut analyst James Wilson said. “Some of them seem in a state of bewilderment about what to do with that cash.”
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