Wave of Australian gold mine M&As receding

[SYDNEY] A wave of gold mine acquisitions in Australia may be coming to an end as valuations rise and companies focus on exploiting existing assets, Evolution Mining Ltd Executive Chairman Jake Klein said.

Under Mr Klein, Evolution has helped spearhead billions of dollars in M&A across the Australian outback in a quest to elevate its standing on the Australian Securities Exchange to that of a major producer.

Others doing the same thing included Northern Star Resources and an Australian arm of China's Zijin Mining Group .

So far this year there have been some two-dozen announced deals in gold mining worth more than US$1.7 billion, compared with about US$2.2 billion in 2013 and 2014 combined, according to Reuters data.

Over the last four years, Evolution has developed or bought seven gold mines, leap-frogging Northern Star to become Australia's second-biggest gold miner after Newcrest Mining , with a market capitalisation of A$2.2 billion (US$1.59 billion). "We are having our moment in the sun, but you must be careful not to get sunburnt," Mr Klein told Reuters.

Asking prices for gold mines that may be on the block have gone up since Evolution made its last big buys, a pair of mines from Luxembourg-based La Mancha Group International BV which it bought for A$230 million, and one from Barrick Gold priced at US$550 million. "Operating assets today are certainly more expensive than they were a year ago," Mr Klein said. "We're now focused more on integrating existing assets and getting them to perform successfully." Northern Star is also settling in to a period of working its assets after a buying spree, saying the strategy will allow it to lift its annual output to 700,000 ounces and beef up reserves for future production. "We recently added 2.7 million ounces to our resource base at a cost of just A$19 an ounce," Northern Star Managing Director Bill Beament said. "Now we are investing in targeted exploration and expansionary capital to continue advancing that inventory in our pipeline of organic growth." Both Evolution and Northern Star acquired Australian gold mines from Barrick, which has sought to reduce debt by selling assets after becoming over-leveraged to the US dollar gold price, which stands at around US$1,161 an ounce - some US$20 an ounce under its Jan. 1 level.

REUTERS