London, England — MININGREVIEW.COM — 17 November 2008 – Small gold firms hit by the credit crisis and weak gold prices are reported to be keen on mergers with bigger rivals, but any such consolidation will probably have to wait until volatile share prices have stabilised.
Reuters quotes Barrick Gold Corporation executive vice president of exploration and corporate development Alex Davidson as saying “it’s hard to convince someone to accept a 30%premium when their stock price is 90% down.”
“The market’s got to settle and I think it will. Once everyone gets comfortable with the resulting valuations I think you will see more merger and acquisition activity between cash-rich companies and project-rich companies,” he added. “Barrick – the world’s biggest gold producer – is in a healthy financial position, with US$1.7 billion (R18 billion) of cash and US$1.5 billion (almost R16 billion) in undrawn credit available,” he said.
“We are in a very strong position to do our development projects or make acquisitions. Barrick will press on with three new mine projects that will add nearly 2 million ounces of production a year, but it is reviewing the viability of other potential developments,” Davidson continued.
“The downturn has opened up potential takeover opportunities, but not many are top quality,” said Goldcorp chief executive Kevin McArthur.
“A lot of companies have come knocking because a lot of juniors are in tough shape right now," he added. “Goldcorp will be very disciplined on takeovers since it also has new mines it would like to develop.”
Goldcorp has operations in Canada and Latin America, and is developing its key Penasquito project in Mexico.
Randgold Resources chief executive Mark Bristow said he was looking at opportunities, but was more interested in early-stage, longer-term projects, since the firm’s new mines will ramp up output in the medium term.
“There are good deals to be done now with decent assets, and we are looking at those,” he added.
“Randgold, which focuses on West Africa, is interested in Democratic Republic of Congo, among other nations in the region,” Bristow concluded.