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BMO Studies Potential Buyers, Targets For Gold Mergers

Kitco News

(Kitco News) - BMO Capital Markets says Australia’s Newcrest Mining Ltd. and Canada’s Agnico Eagle Mines Ltd. are in “positions of strength” to be possible buyers for mergers, while South Africa’s Gold Fields Ltd. and Canada’s Yamana Gold Inc. may be “preferred targets.”

“Seeing as M&A [mergers and acquisitions] amongst the large producers in the gold space is the topic of the day, we thought we would explore the realm of opportunities for more M&A,” BMO said.

The BMO report did not suggest that any of these companies are on the verge of a deal; analysts were simply trying to identify which ones for which a merger might make sense.

Two mega-deals occurred among the senior gold-mining companies in recent months. Barrick Gold Corp. completed the acquisition of Randgold Resources Ltd. at the start of the year, and news broke earlier this month that Newmont Mining Corp. has agreed to acquire Goldcorp Inc. in a mostly all-stock transaction that would create the largest gold-mining company in the world.

Also in the precious-metals space, Pan American Silver Corp. is in the process of acquiring Tahoe Resources Inc.

BMO analysts said they tried to identify which large producers are in a better position to embark upon an M&A versus which are more vulnerable.

“We see Agnico, Barrick, Fresnillo, and Newcrest as potential acquirers, and AngloGold [Ashanti], Gold Fields, Kinross, and Yamana as potential targets,” they said.

However, while listing Barrick as a possible buyer, BMO also said the timing is probably not right, as Barrick’s focus at the moment is integrating with Randgold.

A recent Bloomberg story said Gold Fields would like to merge with larger South African rival AngloGold. However, Gold Fields put a notice on its website denying the report and calling it “factually incorrect.”

Analysts said they assessed a variety of potential combinations based on a 15% premium, and highlighted percentage accretion/dilution across metrics such as net asset value, cash flow and free cash flow per share, as well as production and all-in sustaining costs. They also looked at geographic synergies.

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