Gold and silver mining companies are ripe for acquisitions. Experts believed that 2022 M&A deal season would continue breaking records with global M&A volumes pushing over $5 Trillion for the first time ever. However, Q1 2022 has not been what everyone was hoping with deal volume considerably lower due to investor sentiment, increasing inflation fears and most recently the Russian Ukrainian Crisis.
Oversold and pushed out of the mainstream, gold deals have fallen out of fashion in recent years. Last year 2021 saw a sizeable uptick in deal appetite with a global volume of $21.3 Billion and with gold prices over $1900, it’s only a matter of time until some mining deals start hitting the tape. The former Goldcorp boss who is currently CEO of Gold Royalty Corp David Garofalo believes that “this is just the beginning of the M&A cycle”. Gold mining companies in the past decade have built up their balance sheets, are ripe with cash and have proven their abilities to pay out stable dividends. With inflation causing havoc and gold at near record levels miners will start looking externally to build up their pipeline of deals to ensure that they have suitable projects which generate stable cash flow to please investors. Gold deals can be looked at as the contrary of tech, physical assets with the ability to generate positive cash flow…
Another interesting argument can be made that miners have looked at potential deals in the past with solid geological findings, however at the time they might have not been economical, and now as Market Intelligence analyst Robert Anders found that “Sixteen of the world’s 20 largest gold miners … saw their overall remaining years of production fall over the 2010-19 period,”. Miners can perhaps look to refill their pipeline by acquiring on deals they might has passed on before.
Industry experts believe that produces are willing to take more risk in acquiring developmental projects with a stable gold price, it wouldn’t be surprising to see a considerable uptick of mid sized deals. However in the past few years the mega deals are what moves the market and as John Burzynski said “the game has become be the biggest or get bigger”, so the question is who will be next.
At the Gold & Silver index we highlight undervalued exploration, developments and producing companies which we believe offer prospective acquirers unique opportunities.
