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Gold market is hot again - Mega deals turn gold mining around

Mark Bristow, Barrick Gold CEO, source Bloomberg NewsAfter years on the sidelines, gold producers are suddenly the mining world’s hottest topic as the industry gathers in Cape Town this week.

For more than half a decade, gold miners have been stuck in the doldrums, shunned by investors following a string of missteps and bogged down by a stagnant bullion price. Then, in September, a surprise mega deal turned the industry on its head.

 (photo: Mark Bristow, CEO, Barrick Gold, Bloomberg News)

Barrick Gold Corp.’s $5.4 billion purchase of Randgold Resources Ltd. set off a chain reaction that led to Newmont Mining Corp.’s $10 billion deal for Canada’s Goldcorp Inc. last month. The flurry of activity – which coincided with a late-2018 surge in bullion prices – has re-ignited interest in gold, throwing the whole industry into a thrall of speculation over who might be next.

 “It’s an exciting time to be a gold miner,” said Martin Horgan, the chief executive officer of Toro Gold, who arrived in Cape Town this weekend.

Horgan said while specialist funds have remained supportive of profitable companies, he sees the resurgent gold price drawing generalists back to the sector.

Barrick Gold Corp.’s $5.4 billion purchase of Randgold Resources Ltd. set off a chain reaction that led to Newmont Mining Corp.’s $10 billion deal for Canada’s Goldcorp Inc. last month. The flurry of activity – which coincided with a late-2018 surge in bullion prices – has re-ignited interest in gold, throwing the whole industry into a thrall of speculation over who might be next.

As thousands of executives, investors and bankers fly in to Cape Town for the annual Mining Indaba conference, one of big themes for the week is likely to be the future of South Africa’s own gold mining industry.

The country’s gold output fell for a 14th straight month in November as the sector grapples with cost pressures, geological challenges and labor disputes. The biggest Johannesburg-based producer, AngloGold Ashanti Ltd., is currently considering a London listing and exiting its last South African gold projects, people familiar with the matter said in December.

Further afield, analysts have tapped companies from Kinross Gold Corp. to Iamgold Corp. and Australia’s Newcrest Mining Ltd. as names to watch amid expectations that the wave of deals has further to run.

Gold equities have also been boosted by a rebound in bullion. The metal’s impressive December rally has carried over into 2019 as concerns stack up about slowing global growth and holdings in exchange-traded funds continue to expand.

For the wider mining industry, the excitement around gold has served as a shot in the arm at a time when big diversified producers are veering away from dealmaking fireworks in favor of asset sales, cost cutting and shareholder returns.

Reporting by Thomas Biesheuvel, Bloomberg News

https://www.bloomberg.com/news/articles/2019-02-03/after-years-in-the-doldrums-gold-miners-are-finally-hot-again