Olivier Aeschlimann, Senior Financial Analyst
Since last fall, the gold mining sector has been shaken by a wave of mergers and acquisitions. In September 2018, Barrick Gold announced the acquisition of Randgold for USD 4.5 billion. Three months later, his great rival Newmont Mining responded with a merger project with Goldcorp. This $ 10 billion deal was to enable Newmont to become the new leader in the sector. This transaction is now being challenged by a counter-offer from Barrick to Newmont’s shareholders: abandon the Goldcorp buyout and instead merge with us, we will unlock more synergies, which will allow us to increase our value creation for shareholder.
“Synergy” is indeed the key word behind all these mergers and acquisitions. The gold sector is caught between the price of gold that remains stubbornly low (the yellow metal has not reached the bar of USD 1400 per ounce since 2013 despite historically low interest rates and multiple geopolitical tensions) and production costs that are steadily increasing.
In addition, it is always more difficult to discover new deposits and renew its reserves. That’s why, regardless of the Newmont shareholder’s decision, we believe the consolidation of the gold sector is just beginning.