`Disastrous’ Deals Sideline Gold-Mining M&A as Metal Rises


Gold Silver Reports – `Disastrous’ Deals Sideline Gold-Mining M&A as Metal Rises  — Stung by some lousy investments that led to billions of dollars in losses a few years ago, the world’s major goldproducers have cut way back on mining deals — even as metal prices posted their biggest rally since 2010.

The value of the industry’s transactions, from acquisitions to venturecapital financing, tumbled by more than a 3rd in 2017 to $8.95 billion, the lowest in at least a dozen years of data compiled by Bloomberg. The decline reflects the skittishness of an industry that went on a buyingspree in 2010 and 2011, when prices surged to records, and then got stuck with too much debt and huge write-downs after bullion tumbled.

While prices are up over the past two years, executives are reluctant to start buying again. Share-holders harshly criticized past deals, which billionaire hedgefund manager John Paulson estimates led to $85 billion of writedowns since 2010. Bullion remains about 30 percentcheaper than its record in September 2011, but over the same period, shares of major mining companies tracked by Bloomberg Intelligence fell even more, by more than half.

“There were some disastrous M&A deals done in the past, which destroyed a lot of shareholder value,” Thomas Kaplan, chairman of Electrum Group Ltd., a miningfocused investment firm that’s the largest shareholder in NovaGold Resources Inc. “We’re still in the phase where investors have been turned off by low returns.”

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And for good reason. In the rush to boost output in 2011, companies spent a record $38.7 billion on deals like acquisitions and equity financing, data compiled. That year, gold reached an all-time high of $1,921.17 an ounce. In 2012, the value of unmined bullion reserves had reached $224.23 an ounce, almost triple what it was six years earlier. But by September 2015, gold had slipped to $1,115.09 and the value of reserves in the ground was $90.90.  – Neal Bhai Reports