MORE MERGERS FOR THE GOLD MINING INDUSTRY
makes it hard for any mining company to be successful .
“ I don ’ t believe as an industry we ’ re profitable at $ 1,300 , let alone $ 1,250 ,” he said . “ If you look at the assumptions being made to allocate capital today , they are above the spot price , which doesn ’ t make a whole lot of sense .
“ Although we ’ re [ the industry ] saying the right things , I don ’ t believe we ’ re actually doing them , with exceptions of course .”
Mergers and acquisitions During the first half of 2014 , deals for the mining and metals industry had a total value of $ 16.7 billion . That ’ s 69 percent less than the previous year , and 34 percent less in deal volumes . Nearly nine out of every ten agreements were valued at less than $ 50 million .
Simply put , there needs to be more mergers in the gold sector .
According to estimates by Bloomberg , funds raised $ 1.1 billion for investments in mining and metals this year , which is nothing compared to the $ 8.8 billion in 2013 . Less than $ 2 billion has been spent by PE investors on mining assets in the past two years . The latest Ernst & Young market barometer believes contributors
‘ By combining companies in mergers and / or acquisitions , unprofitable operations can be eliminated and weak companies with good assets can be targeted by stronger producers ’
to these funds are unlikely to wait much longer to see their investments put to use .
“ There should be a flurry of activity within the next 6-12 months , as these countercyclical investors who have been waiting for clear signs that we are at the bottom of the market begin to make their move when assets prices are at their lowest ”
Consolidation is another consideration the industry teetering on .
By combining companies in mergers and / or acquisitions , unprofitable operations can be eliminated and weak companies with good assets can be targeted by stronger producers .
It ’ s a win-win for the gold industry .
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