Miner firms including Barrick Gold Corporation (USA)(NYSE:ABX) are focused on boosting efficiency and reducing debt after a 40% decline in gold prices, leaving investment bankers expecting a wave of consolidation in the coming period. Still, while merger and acquisitions activity has been at a lower side of late, major producers like Barrick Gold, and Newmont Mining Corp (NYSE:NEM) have been selling their assets to improve balance sheets.
While small firms starved of funding options are believed to be easy targets, larger companies are finding measures to trim spending and cut costs, leaving the prospect of a series of corporate deals far less likely in the current scenario. This view was expressed from all the major producer firms from Goldcorp Inc. to Nordgold NV at the Denver Gold Forum. Only $62.7 billion in mining agreements have been reported in 2015, down from $191 billion in mining deals in 2011.
It is because Barrick Gold and other miner companies are still concentrated on optimizing operations and reducing debt after the decline in yellow metal prices and the massive equity rout in a generation. Weakening domestic currencies are also defending miner firms from the harm of the bullion slump, minimizing the need for distressed M&A deals.
Nikolai Zelenski, the CEO of Nordgold, said that within the junior market, the market can witness some consolidation. Larger firms still have a bit of potential before things get worse for them. The Denver conference brought the gold miners including Barrick, Newmont Mining Corp (NYSE:NEM), and Goldcorp along with investors on the same platform. However, it didn’t include the investment bankers that generate money from deals.
The problem for miners is that amidst the need of clarity on monetary policy in the U.S, gold volatility has surged and that of course is one of the reasons behind delayed deals. Takeover measures among junior firms likely will pick up as and when gold prices stabilize.