A wave of consolidation is coming in the gold mining industry, but don’t count on buyers overspending on assets, B2Gold Corp. chief executive officer Clive Johnson said.
“You have an environment now where people are learning their lesson, which is don’t get in bidding wars and pay crazy premiums to acquire companies,” Johnson said in a telephone interview Wednesday. That means “companies that aren’t doing too well” won’t be appealing to better-managed miners.
In the decade-long bull run that took prices of the precious metal to a record in 2011, companies bought assets in their rush to ramp up output to meet rising demand for the metal, accumulating debt to close those deals. As prices reversed and the metal languished in a bear market for years, investors hit the exit, leaving many miners unable to service their obligations and forcing them to cut costs to survive.
Companies are rethinking their approach to deals as prices rebound from a low in 2015. Declining reserves are also highlighting the urgency to buy mining assets to boost their production profile. In September, Barrick Gold Corp. announced a zero-premium deal to buy Randgold Resources Ltd. That spurred expectations that buyers won’t pay much more than the value of the assets to get deals done, Johnson said.
The B2Gold CEO said his company isn’t interested in making deals beyond “great exploration opportunities.”
“Spread the word — no M&A from us,” Johnson told analysts on the company’s earnings call Wednesday. “We’re not going to pay for ounces.”