June 03, 2023

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Mergers To Hit Mining Sector

THE improving outlook for gold prices could encourage mergers and acquisitions in the mining industry as overleveraged major firms continue to offload assets in an effort to narrow portfolios while others seek consolidation, a mining report by Mineweb has revealed.

It is however unclear whether mining giants such as GoldFields, AngloGold and Golden Star Resources which have mines in Ghana will seek mergers and acquisitions.

According to the report, “Chinese firms in particular will drive deals, with the Asia Pacific region accounting for 46.0 percent of global gold mining mergers and acquisitions over the first three quarters of 2016”.

It noted that “Barrick Gold, Newmont Mining, AngloGold Ashanti and Goldcorp will remain the largest producers, accounting for approximately one-quarter of global output.”

The report forecasted an average of US$1,250 per ounce of gold in 2017 and US$1,350 per ounce of gold in 2018.

Meanwhile, AngloGold Ashanti will begin to increase capital expenditure in 2017 on the back of improving financial results, according to reports.

However, the firm will remain focused on reducing debt and increasing cash flow in order to achieve returns in a sustainable basis due to persistent risks in South Africa and Tanzania.

According to Mineweb, AngloGold Ashanti will continue to pursue a strategy of improving both operational and cost performance in order to improve the company’s balance sheet.

“The firm will focus specifically on reducing debt and increasing cash flow in order to raise margins and returns on a sustainable basis. Anglo performed particularly well on this count over 2016, as witnessed by the significant reduction in debt to EBIDTA and the strong increase in cash flow in relation to 2015”.

Although AngloGold is well diversified in terms of location, it remains heavily exposed to fluctuation in gold prices. “We expect further trouble for South Africa’s mining sector, as the government seeks to implement the new mining charter, currently in suspension, which will impose greater compliance costs on miners.”

AngloGold Ashanti is the third-largest gold mining company in the world and the largest gold miner in South Africa, by production. The company has 17 mines in nine countries and is developing a project in Colombia.

AngloGold Ashanti’s primary listing is on the Johannesburg Stock Exchange. In addition, the company is also listed on the New York Stock Exchange, the London Stock Exchange, the Ghana Stock Exchange and the Australian Securities Exchange.


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