From Mega to Mid-tier: Tracking the Path of Gold M&A Activity

Global merger and acquisition (M&A) activity is down as much as 30 percent year-over-year, but there have been some sizeable deals in the gold sector in May. 

Midway through the month, three deals were in the works, including a since-abandoned three way merger that would have seen Gran Colombia Gold (TSX:GCM,OTCQX:TPRFF) acquire both Gold X Mining (TSXV:GLDX,OTCQX:SSPXF) and Guyana Goldfields (TSX:GUY,OTC Pink:GUYFF), plus a merger between SSR Mining (TSX:SSRM,NASDAQ:SSRM) and Alacer Gold (TSX:ASR,ASX:ASR). Meanwhile, Adriatic Metals (ASX:ADT,LSE:ADT1) was planning to purchase Tethyan Resource (TSXV:TETH).

The SSR Mining deal has been described as a merger of equals, while Adriatic said the Tethyan acquisition would bolster its portfolio with Serbian assets.

Gran Colombia’s ambitious tie up was touted as a friendly merger with Gold X and a hostile takeover of Guyana Goldfields; both deals were contingent on the other being finalized.

“That kind of M&A activity adds to the gold market momentum,” said Resource Maven Gwen Preston during a recent webinar presentation.

“When you see deals happening, that means first of all that mining executives have confidence in the gold bull market, they have enough confidence that they’re pulling the trigger,” she added.

According to Preston, these large-scale deals create synergy in the sector, which incites investor interest and promotes further activity.

“It encourages the other miners to also make the kinds of M&A moves that they’ve been considering because they don’t want the assets to get scooped out from under them,” she said.

Speaking about the “3G” deal, Preston said that hostile takeovers tend to lead to bidding wars, which only amplify gold market momentum. As mentioned, the deal is now off the table — Gran Colombia ultimately announced that it would not be going through.

A rising tide of gold M&A activity

According to financial market data provider Refinitiv, the first month of 2020 brought the smallest number of takeovers and deals in almost seven years.

However, despite the onset of COVID-19, a rising gold price and spiking demand appear to have paved the way for second quarter deals, as outlined above.

And while global M&A activity was lower initially in 2020, gold sector deals — especially in Canada — have been ramping up since late 2018. In fact, 2019 saw a large amount of deal-making for gold companies in the country, with the total amount ringing in at C$31.8 billion.

“M&A usually increases in the early stages of a bull market, and so the increased activity in the gold space is certainly positive,” said Derek Macpherson of Red Cloud about the latest round of M&A.

“Additionally, these transactions (whether all-share or cash) often free up the capital of large institutional investors, allowing them to re-invest in the space, benefiting other companies.”

From January to December of last year, there were more than a dozen deals, ranging from total takeovers to project purchases.

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