Gold mines on market after mergers should interest mid-tier miners

TORONTO (Reuters) - Mid-tier miners such as Kinross Gold, Iamgold and Agnico Eagle Mines, seeking to bolster production, would likely bid for mines to be sold following two recent gold mega-mergers, investors and bankers said.

Barrick Gold and Newmont Mining said they will focus on the best-performing mines following their respective acquisitions of Randgold Resources and Goldcorp. This has prompted expectations of mine sales around the world over the next few years.

While the two acquisitions have spurred speculation about a pick up in long-dormant gold M&A, the difficulty of raising capital for larger deals makes single-asset transactions more likely, bankers said.

Mid-tier miners need to boost production after years of growth-killing cost cuts. Also driving demand will be the scarcity value of large mines that have not traditionally be up for sale.

“They aren’t tier one mines or world-class, but a lot of them are very good,” said Christopher Mancini, a mining industry analyst for the Gabelli Gold Fund, who expects Kinross and Iamgold to bid for some of the mines. “Those who are a little bit smaller than these new companies would be interested in these assets” to boost production.

Acquisitive Chinese companies including Zijin Mining Group and Shandong Gold Mining could also snap up the assets, bankers said.

RIGHT FIT

High quality operating mines with long lives in safe jurisdictions like North America are likely to see the strongest interest and get the best prices, they added.

Goldcorp’s Éléonore mine in Quebec fits that description, and one interested party may be Agnico Eagle, which operates in the province, Mancini said.

Agnico Eagle CEO Sean Boyd told Reuters the company will stay focused on single-asset purchases and early-stage takeovers but “we don’t see a lot that can move our needle.”

Kinross has noted advantages to owning an asset in Canada, where it only has a corporate presence.

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