The gold sector has seen $40 billion in merger and acquisition activity this year, providing reasons for optimism. Despite the price of gold being unstable since the beginning of the year, it has increased by 7.2% since January.
At the beginning of the year, gold was valued at US$1,824 per ounce, with the price steadily increasing throughout January and peaking at US$1,953 per ounce early in February.
However, by the end of February, the price had fallen to a low of US$1,811 per ounce. The price strengthened and rose to its current level of US$1,955 per ounce in March, briefly reaching above US$2,000 amid turmoil in the banking sector.
In February, the gold price was temporarily weakened by unexpectedly strong US economic data, causing the dollar to strengthen. However, the retreat was short-lived, and the prospect of additional rate hikes caused the gold price to rise once again.
A rise in strategic players purchasing gold and gold assets has also influenced the dynamics of the market.
Some of the world’s largest mining companies and national governments have acknowledged that prevailing economic conditions are expected to push up the value of gold and gold assets.
In 2022, central banks acquired a net amount of gold for the thirteenth consecutive year, marking the highest level of annual gold demand from central banks ever recorded.
Moreover, China registered an increase in its gold reserves for the third consecutive month in February, while the Central Bank of Croatia purchased nearly two tonnes of gold in December, marking the bank’s first gold purchase in 20 years.
In addition to the government purchases of gold, there has been a substantial number of gold miners acquired by competitors.
For example, Newmont Corporation of Canada Ltd, the world’s largest gold miner, proposed a $17 billion acquisition of rival Newcrest Mining Limited (ASX: NCM).
Canada’s Agnico Eagle Mines and Pan American Silver Corp are purchasing Yamana Gold (TSX: YRI, LSE: AUY) for $4.8 billion, and Agnico Eagle Mines is spending $10.4 billion to acquire Kirkland Lake Gold.
BHP Limited is also in the process of acquiring OZ Minerals for $6.4 billion, while B2Gold Corp. (TSX: BTO) is purchasing Sabina Gold & Silver Corp. for $800 million.
Finally, Rob McEwen, the former Goldcorp chief, has acquired a 37.6% stake in junior gold explorer Satori Resources.
With almost $40 billion worth of transactions already completed, it is highly improbable that the surge in gold mergers and acquisitions will come to a halt, as several analysts and commentators anticipate more such transactions to occur this year.
As yields on bonds decrease and interest rates increase, the price of gold is also expected to increase, resulting in a decline in the purchasing power of the dollar and the standard of living of consumers.
We should anticipate ongoing uncertainty in the global financial markets throughout 2023, which will only bolster a favourable trend in the price of gold.
Considering this optimistic context, several gold companies might be worth examining closely, as they could present compelling prospects for larger competitors to acquire or may be well-positioned to benefit from an upswing in investor interest in the gold industry.
Here are four noteworthy players to keep an eye on:
Shanta Gold Limited (AIM: SHG, OTC: SAAGF) has attracted interest from three potential buyers, including Chaarat Gold, a UK-listed firm. Shanta Gold’s objective is to boost production in Tanzania at the New Luika Gold Mine and achieve its first gold pour at Singida, ultimately aiming for an annual production of 100,000 ounces.
Caledonia Mining Corporation PLC (AIM: CMCL, NYSE-A: CMCL) recently raised £10.5 million in a successful fundraiser, which will enable it to expedite its work program in Zimbabwe. The company expects to extract up to 97,500 ounces this year from its Blanket and Bilboes operations in the country. Caledonia’s ability to generate solid quarterly dividends suggests it remains a profitable cash generator for investors.
Greatland Gold PLC (AIM: GGP, OTC: GRLGF) is another notable contender, with a 30% stake in the Havieron copper-gold project in Western Australia’s Paterson region. Newcrest owns the remaining share and is developing the deposit, which has the potential for 6.5 million gold equivalent ounces, making it a world-class asset. However, Havieron’s future, and consequently Greatland’s, may be influenced by the outcome of Newcrest’s potential acquisition by Newmont.
Finally, Ariana Resources PLC (AIM: AAU) has demonstrated that good things do come in small packages. The company’s Kiziltepe Mine in Turkey produced a record-high of gold ounces in 2022 (28,421) and revenue (US$58 million), marking the sixth year in a row that output exceeded guidance. While 2023 may not match the previous year’s performance, the recent 26% drop in Ariana Resources’ stock price appears unjustified.
