More mega-miner M&A during a healthy gold correction
With Gold Futures in the process of consolidating a 3-month $355 move higher that began with a $50 downside reversal on February 2nd, the world's largest gold miner announced its intention to become even bigger on Sunday evening. U.S. based Newmont Mining Corp. made an almost $17 billion offer to acquire Australia's Newcrest Mining Ltd. , aiming to distance itself further from number two producer Barrick Gold Corp..
Although Barrick CEO Mark Bristow has stated numerous times over the past several years that much more consolidation in the industry is necessary, he denied a counterbid for Newcrest during an interview on Monday with Bloomberg. "There is a difference between value merger acquisitions and getting bigger for the sake of getting bigger," Bristow added.
The aforementioned Yamana Gold takeover saga began with a more definitive agreement, under which Gold Fields Ltd. would acquire all of the outstanding common shares of Yamana. Yet, the deal was canceled in November, with Yamana paying a termination fee of US$300 million to Gold Fields after a rival bid of a combined $4.8 billion in cash and shares by Aginco Eagle Mines Ltd. and Pan American Silver Corp. was subsequently accepted.
The Barrick/Randgold merger announcement in September of 2018, followed by Newmont Corp.'s subsequent acquisition of Goldcorp Inc. a few months later, became the catalyst that sparked a wave of M&A in the junior space throughout 2018 – also a time when the mining sector was being ignored by generalist investors as it is currently.
Meanwhile, Gold Futures did not spend much time trading between $1800-$1900 before this selloff, as bullion quickly moved from $1700 to $1900. After such a sharp move higher into extreme overbought territory, we may see testing of the $1800-$1850 region before the market has strong conviction to go higher again.
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