South Africa’s gold miners look at mergers to stay afloat
Mining mergers and the shuffling of assets between South African gold companies may be just around the corner as miners elsewhere continue to pare down their portfolios amid falling commodities and increased pressure to cut costs and repay debt.
Harmony Gold (NYSE:HMY), Sibanye Gold Ltd.(NYSE:SBGL), and AngloGold Ashanti (NYSE:AU) are, according to Bloomberg, among the top candidates to consider deals as a way of slashing costs in their aging mines and insulating investors from risks such as labour strikes in South Africa, the world’s sixth-biggest producer of the metal.
“We’re probably a good target right now,” Graham Briggs, CEO of Harmony, the country’s third-largest bullion producer, told Bloomberg. “A low share price, we’re fairly good with our cost control. If we had bigger management fees to take out it would be even more of an advantage. We have low debt.”
“Maybe there’s some smart consolidation that can take place on a regional basis,” added Neal Froneman, CEO of Sibanye Gold, a company made-up of mature South African mines spun out of Gold Fields Ltd. (NYSE:GFI),
Nearly 33% of all gold production is a money-losing venture when the price of the precious yellow metal is lower than $1,150. The metal, however, continue to hold Tuesday above that figure after economic woes in the Eurozone prompted further sell-offs in European equity markets this morning.
The spot gold price was last at $1,232.40/1,233.20 per ounce, down $2.70 on Monday’s robust close but just below a four-week high hit in the previous session at $1,238.
But if it goes down again, analysts expect producers to decline and unprofitable mines be closed. A problem South African miners may have already found a solution for.