The Newmont/Goldcorp merger is the second mega-deal in the industry after Barrick acquired RandGold in September. Without question, the two deals reflect the growing need for large gold and silver mining companies to replace reserves, which are being depleted at these two companies more quickly than they are being replenished. The deal will give Newmont access to Goldcorp’s portfolio of developing and exploration projects acquired by Goldcorp over the last several years.
While this deal and the Barrick/Randgold deal will help cover-up the managerial, operational and financial warts on Barrick and Newmont, it will also likely stimulate an increase in M&A activity in the industry. I believe that the other largest gold mining companies – Kinross, Yamana, AngloGold Ashanti, Gold Fields, Eldorado, and Agnico-Eagle – will look closely at each other and at mid-cap gold producers to see if they can create “synergistic” merger deals
The same “impulse” holds true for silver companies, the largest of which are diversifying into gold or acquiring competitors (Pan American acquires Tahoe Resources and SRM Mining buys 9.9% of Silvercrest Metals, which will likely block First Majestic from going after Silvercrest, and Americas Silver buys Pershing Gold). Similarly, we could see mid-cap producers merging with each other or acquiring the junior producers.
Phil Kennedy – Kennedy Financial – invited me along with Craig Hempke – TF Metals Report – to discuss the implications of the two gold mega-deals, our outlook for the precious metals sector and a some other timely topics affecting the financial markets:
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In my latest issue of the Mining Stock Journal, I provided a list of gold and silver stocks that I believe could become acquisition targets this year, as well as an in-depth update on one of my top gold exploration stock ideas. You can learn more about this newsletter here: Mining Stock Journal