The M&A battle among the world’s biggest gold diggers intensified this week, with Barrick bearing its teeth in a US$18 billion hostile bid for arch rival Newmnont.
The move was immediately blasted as “desperate” and “bizarre” by Newmont’s CEO, Gary Goldberg. He suggested the “at market valuation” offer - actually a discount to recent share price closes - was actually a way for Barrick to “muddle up” Newmont’s own $10bn takeover of Goldcorp. Could it simply be a matter of gold’s titans fighting it out to see who ends up as the largest?
Whatever the result of these deals at the top end of the scale, actual gold production in Canada looks set for a good year thanks to growing investment in gold mining and explorations companies over the last decade. Analysts at Fitch Solutions have revised Canada's 2019 gold mine production growth forecast up from a healthy enough 2% to an impressive 6% as new projects come online over the coming quarters - many from the country’s junior mining companies. Fitch also predicts steady annual growth of just over 2% in global gold production.
The price of the yellow metal has been moving in ever decreasing circles, making it hard for traders to know which trend to follow: higher lows or lower highs. This fact was noted by Ira Epstein of Goldseek earlier in the week, as he acknowledged that gold charts were ‘hard” of late.
Spot prices started to move more vigorously later in the week but Epstein’s analysis form Monday remains valid: “The 18-day average of [gold price] closes is advancing at a tune of not very much - maybe a dollar a day. I think that’s going to be the key”
Among the diversified miners, Rio Tinto reported a 2% increase in underlying profit, beating expectations. But the real joy for investors came in the form of a US$4bn special dividend, mostly accounted for by a string of recent asset divestments, including Rio’s entire interest in Indonesia’s Grasberg mine. Rio has sold $12bn worth of unwanted assets since 2015, including its entire coal portfolio.
Among the junior mining stocks, Canada’s FPX Nickel Corp. (FPX-TSX.V) enjoyed positive results from metallurgical testing on the Baptiste Deposit at its 100%-owned Decar Nickel District in central British Columbia.
“The metallurgical testing achieved meaningful improvements over the results of previous metallurgical test work used as a basis for the Project’s 2013 preliminary economic assessment, demonstrating significant increases in estimated nickel recovery and final concentrate quality, using conventional processing technologies,’ the company said in an update to the stock exchange.
By contrast, France’s Eramet said on Wednesday it would make a fresh effort this year to stem losses at its nickel business in New Caledonia to avoid a cash crunch next year. Previous efforts to reduce production costs at the SLN unit suffered a setback last year due to higher energy prices, exchange rate effects and protests at its New Caledonian mines, Chairman and CEO Christel Bories said.
“We know that if we don’t do anything, if the plan is not implemented and economic conditions remain as currently, we will have a cash problem in 2020,” Bories said. “We can’t continue like that.”
The SLN unit’s production cost of nickel rose to $5.8 a pound in 2018 from $5.1 in 2017 and Eramet said it was now aiming to lower it by $1.3 by 2021.