OceanaGold remains on the hunt after buying Newmont mine
OCEANAGOLD Corp., a producer with operations in New Zealand and the Philippines, remains on the hunt for more assets after agreeing to buy a mine from Newmont Mining Corp.
The company has the balance sheet to pursue additional deals after it completes the $101 million cash acquisition of the Waihi mine in New Zealand, Chief Executive Officer Mick Wilkes said on Thursday in a phone interview.
Gold producers completed deals worth $18 billion last year, the highest annual total since 2011, as larger companies divest smaller assets in an effort to lower costs, cut debt and protect margins.
Tumbling prices have cut asset valuations as much as 70% and that’s spurring gold companies to seize the opportunity to boost production and acquire new mines, according to Evolution Mining Ltd. Chairman Jake Klein.
OceanaGold is in talks to increase its revolving credit facility to $225 million, from $175 million, which bolsters its capacity for additional deals, according to Mr. Wilkes.
“It’s been our strategy for some time to increase the diversity of the company and grow the size of our production base,” Mr. Wilkes said. “We continue to work toward that and it’s a long game, we have to be patient and we have to be disciplined.”
Barrick Gold Corp. has seen strong buyer interest for its Cowal mine in Australia and Porgera operation in Papua New Guinea, co- president Kelvin Dushnisky said on an April 28 earnings call. Australia’s Newcrest Mining Ltd. has appointed advisers to assist on the potential sale of its Telfer mine.
At least three producers are competing for Barrick’s Cowal, according to people with knowledge of the matter.
Mr. Wilkes declined to confirm whether OceanaGold is seeking to acquire the Cowal, Porgera or Telfer mines. The producer has now “moved on” from considering a takeover of Alacer Gold Corp., he said.
Gold Road Resources Ltd. is among possible takeover targets as larger competitors seek to add operations with low costs or strong exploration potential, Morgans Ltd. analyst James Wilson said by phone from Perth. Gold Road hasn’t received any formal approaches, Executive Chairman Ian Murray told Bloomberg Television in an interview last month.
The Waihi acquisition probably reduces the likelihood of OceanaGold completing another deal soon, Mr. Wilson said.
Gold will probably remain in a range of between $ 1,200 and $1,300 an ounce in the medium term, though any US interest rate rises would add to downward pressure on the metal, according to Mr. Wilkes.
Bullion for immediate delivery advanced 0.1% to $ 1,205.96 an ounce at 10:25 a.m. in Sydney, according to Bloomberg generic pricing.
“The two main drivers are strong demand out of India and China for physical gold, and strong demand from central banks,” Mr. Wilkes said. “There are headwinds from an improving US economy.” —