Chinese producers are aggressively looking at picking up gold companies and mines elsewhere as domestic demand reaches record highs.
Takeovers and asset purchases by Hong Kong and mainland miners increased to a record $2.2 billion in 2013 according to data compiled by Bloomberg.
Chinese companies like Zijin Mining Group and Zhaojin Mining Industry Co are in a good position to to take a bite out of struggling North American and European-based producers because:
- Chinese gold demand is soaring and at 1,000 tonnes will overtake Indian purchases this year, but domestic deposits are less than 5% of the global total.
- Targets are cheap – the S&P/TSX Global Gold Index of the globe's 49 biggest gold companies are down 31% this year alone.
- Domestic Chinese producers enjoy some of the lowest cash costs – Zhaojin manages $549/oz, compared with a global average of $831/oz
- Chinese and Hong Kong companies have access to cheap capital – Zijin got $4.9 billion in soft loans from a state bank for M&A
- The majors are actively looking to sell as debt levels increase and high-cost mines are mothballed – Barrick could dump as many as 12 of its mines.
Possible targets include:
- Australia's Mali-focused Papillion Resources ($390 million)
- Toronto-based Iamgold ($2.5 billion)
- Amara Mining active in West Africa ($48 million)
- Perseus Mining ($325 million) with producing mines in Ghana and Cote d'Ivoire
While these companies are looking to get rid of a number of mines:
- Barrick Gold
- Newmont Mining Corp
- Gold Fields
- Alacer Gold Corp