Merger Mania in Gold Mining Industry

In a bid reflecting the growing challenge of finding and producing gold, the world’s largest gold miner, Colorado-based Newmont Mining, is bidding to purchase Australia’s largest miner of the precious metal, Newcrest Mining Ltd.

Newmont offered $17 billion in stock on February 5. That would mark the biggest mining takeover in history. But market speculation was that Newmont might raise its bid to win Newcrest’s acceptance of the proposed transaction.

The combined company would have annual production of as much as 8.5 million ounces of gold. If completed, the deal would reunite the two businesses, since Newcrest was spun out of Newmont in the 1990s. Newmont has gold and copper mines in North America, South America, Africa, and Australia, while Newcastle operates mines in Australia, Canada and Papua New Guinea.

The gold mining industry confronts rising operating costs, dwindling gold ore resources, and increasing difficulty discovering new deposits, all factors that contribute to a bullish long-term outlook for the price of gold and also account for the flurry of mergers in the gold mining industry.

Agnico Eagle Mines Ltd. completed a $10.4 billion takeover of Kirkland Lake Gold Ltd. in early February, while Yamana Gold is in the process of selling itself for $4.8 billion to Agnico Eagle Mines and Pan American Silver Corporation. Agnico Eagle became the third largest bullion producer last year when it purchased Kirkland Lake Gold Inc.