If all goes to plan25 Jan 2019 09:02
From Macquarie Bank
When in doubt, merge! That’s not quite the exaggeration it might appear because with mega-deals breaking out across the gold sector and smaller M&A proposals starting to surface, it’s beginning to look like 2019 could be the year of the mining deal.Two of the biggest-ever gold mergers are underway, Barrick + Randgold and Newmont + Goldcorp, with a third in the official denial phase, Gold Fields + AngloGold Ashanti – and everyone knows that an official denial can sometimes be reason to believe that something’s afoot.The point about the outbreak of gold-sector merger fever is that it does have substance and could last for some time as cash-rich producers hunt for asset-rich developers in need of cash.Copper too is starting to be affected by an urge to grow with Sandfire suggesting to MOD Resources that a deal might be in the best interests of both companies – with more to come in that situation.Macquarie Bank certainly believes that M&A activity could be a value-driver this year, not just from straight-forward takeover bids but from the flow of deals in the wake of the international mega mergers, with Australian gold miners likely to be at the forefront of bidding for discarded assets.“Divestments from the recent Barrick + Randgold tie-up and the proposed Newmont + Goldcorp merger will likely deliver assets onto the market,” Macquarie said in a note on Australian goldminers headed: “The push for the summit”.“With most Australian gold producers already sitting on substantial cash balances, an additional boost from higher gold prices over the next couple of years could set the stage for some aggressive bidding.”The question for investors is whether they want to be on the buy or sell side of emerging deals, with sell generally the best place to be.The other point raised by Macquarie in its “summit” gold note is that the bank seems to have picked up on a theme pursued regularly in this column – that gold in Australian dollar terms is heading into the stratosphere, perhaps above $2000 an ounce thanks to the twin effects of the US dollar gold price and a flat Australian dollar. Macquarie’s revised gold price tip is for the metal to rise to $US1425/oz by this time next year (up $US145/oz or 11.3%), and with the exchange rate stuck at around US72c that price forecast implies an Australian gold price of $A1979/oz.If correct, there is really only one way for gold miners to go:_up – which is what Macquarie reckons,
Gervase is Ex Macquarie Bank
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