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Gold Takeovers - “PAC-MAN” Phase Upon Us
Years ago I coined the phrase the “PAC-MAN” phase to describe the eventual consolidation in the gold sector. It is finally upon us now...This just in from Bloomberg:
“The larger companies like Barrick and Newmont and Goldcorp, Kinross in North America in particular, they are all very active consolidators,” Merrill Lynch’s Fournier said in an interview. “They will continue to be pretty active buying smaller companies and also potentially we’ll see some mergers of some of the senior companies at some point in time.”
August 3, 2010
Also from the Bloomberg article:
“There is likely to be more consolidation in the medium-to long-terms as gold producers struggle to grow organically,” said Evy Hambro, who oversees about $35 billion in natural- resources funds for BlackRock Inc. “This is a global trend,” Hambro said...
Gold discoveries have dropped by 4 million ounces a year for the past three decades, Credit Suisse Group AG’s Michael Slifirski said in November, citing a presentation from Gold Fields Ltd.
“Gold companies have finite assets,” said Richard Phillips, managing director of merger adviser Greenhill Caliburn Pty Ltd. “Producers are under pressure to continue to buy or find gold to replenish the production pipeline and many companies look to do both.”
Barrick, the world’s biggest producer, and Newmont, the largest U.S. gold company, have both signaled in the past two months that they may consider “opportunistic” acquisitions.
Note that the quality junior companies will be acquired in this phase. In the tech boom acquisitions were the way to keep your product flow strong and keep your stock moving higher. We are seeing that now in the gold sector and you want to make sure you have your money in the companies that will be acquired.
That is the “cheap” way to buy into some of the mid-size and large cap names. The quality smaller names will be marked up and then receive a premium above the market as they are acquired. As is the case in Kinross, the acquiring company briefly moves lower and consolidates, but then moves higher along with the rest of the market.
There are great charts in here, so please click on the link to read my piece on the “PAC-MAN” phase CLICK HERE.
To read the entire Bloomberg article CLICK HERE.
Eric King
