Gold mining deals set to pick up in 2014

Mergers and acquisitions in the gold industry are expected to pick up as gold miners continue to be valued at a discount because of ongoing price volatility, Bloomberg reports.

Citing comments by Paul Knight, an investment banker for Barclays, the article says gold mining companies are close to their cheapest relative to book value in at least 20 years.

"Majors who have done portfolio optimization will look at some of the juniors and say, 'Here's a chance for us to acquire a potentially better asset than we've sold and to mitigate the loss of production,'" Paul Knight, a Barclays' vice chairman and co-head of global metals and mining, told the news outlet.

Amidst write downs, commodity price drops and lower revenues, gold producers were the hardest hit miners last year. As a result, major players such as Goldcorp (TSX:G), (NYSE:GG) and Newmont Mining (NYSE:NEM) are reportedly among those mulling a potential buyout of low-cost operations. Industry’s No. 1, Barrick Gold (TSX, NYSE:ABX), may generate free cash flow of $4.17 billion this year, also making it better positioned to consider acquisitions in 2014.

Transactions in the mining and metals industry dropped considerably over the last year as companies struggled with capital allocation and access to capital. According to Bruce Sprague, EY’s Canadian mining and metals leader, deal volume and value fell roughly 37% and 58%, respectively, in Canada alone.

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