Tuesday, August 3, 2010

Gold-Company Takeovers Set Record

The acquisition trail has been hot this year, with several deals contributing to $32 billion' worth of takeovers this year. It's only early August, and the gross value of deals has already set a record.
“The reason why we may have seen a pickup in activity this year is because gold prices are around $1,200” an ounce, said Greg Fournier, Hong Kong-based head of Asia Pacific region metals and mining investment banking at Merrill Lynch. “If you have a view that the gold price is strong and is going to go higher then acquiring more reserves or producing properties today makes sense.”
Also a factor is gold majors wanting to increase their resource base in a time when new gold deposits (particularly big ones) are becoming harder to find.

It's only a matter of time before takeover interest will move to smaller deposits. Because of the general fascination with huge-potential properties, the development companies with smaller properties have been overlooked - even ones with good grades. Although less convenient and less easy to manage, someone who's adept at a portfolio approach could put together an agglomeration of smaller properties and wind up with a mid-tier or even a major by collecting those leftovers. Given their low profile, they're likely to be cheaper than a major elephant.


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