Mining for Mergers: Which Gold Miners Might be Acquired?
We've identified three potential ways to play consolidation among gold miners.
As gold prices have scaled new heights in recent years, acquisition activity has begun to heat up in the gold mining space. In this article, we will conduct a case study of recent major transactions in the gold mining space to identify characteristics of attractive takeover candidates. We will then apply these lessons to spot likely takeover targets within our coverage universe.
Profile of the Perfect Target
The primary reason a gold miner would acquire one of its peers is to expand its reserve base. As a gold miner depletes its existing reserves by extracting its below-ground ore, the firm must replenish those reserves to ensure continued production. This need is particularly acute for large majors, who typically deplete reserves at prodigious rates. While miners can expand their reserves by using either their shovels or their checkbooks, many prefer to purchase reserves on the market given the significant capital and time requirements, as well as the highly uncertain prospects surrounding exploration.
Morningstar Analysts does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.