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The head of the world’s third most-valuable gold company says he feels no pressure to do a sizeable mergers and acquisitions (M&A) transaction, despite larger rivals Barrick Gold Corp. and Newmont Mining Corp. striking multibillion dollar deals of their own in recent months.

“Getting bigger for bigger’s sake, I’ve never been a big fan of that,” Sandeep Biswas, chief executive officer of Melbourne-based Newcrest Mining Ltd., said in an interview. “There’s either got to be real synergies, or real technical or other capabilities, where one can enhance the combined entity.”

After about seven years of deep cost-cutting, write-downs and asset sales, there are signs the tide is turning in the beaten down global gold sector. The biggest gold mining companies have started to do large acquisitions again, with Barrick and Newmont paying US$16-billion combined to sweep up rivals Randgold Resources Ltd. and Goldcorp Inc., respectively. The recovery in the price of gold bullion over the past few months is adding to the air of optimism.

But even with Barrick and Newmont getting bigger through acquisitions, the gold industry remains far more fragmented than it was a decade ago, with significantly fewer large capitalization producers anymore, and a much bigger pool of riskier intermediate and junior gold companies.

Michael Siperco, analyst with Macquarie Capital Markets Canada Ltd., wrote in a recent note to clients that this dynamic has resulted in “inefficient allocation of capital, duplication of management and corporate expenses, and increased competition for a shrinking list of development-stage assets.”

For producers to thrive in the long-term, he wrote that more consolidation is needed to create a wider net of “investable” large capitalization companies.

But Newcrest’s Mr. Biswas isn’t convinced.

“I know there is a thesis – the bigger you are, the more you’re going to attract the generalist back in the sector – but the last time I looked into this these mega deals hadn’t really brought the generalist back,” he said.

While playing down any talk of an imminent transaction, Newcrest has entertained doing a large scale M&A deal in the past nine months. The Globe and Mail recently reported that before announcing its acquisition of Randgold in September, Barrick briefly engaged in talks with Newcrest. The Globe also reported that late in 2018, Goldcorp approached the Australian miner.

Newcrest, whose market value is about US$4-billion more than Goldcorp’s, was willing to buy the struggling Vancouver-based company in a zero-premium deal, but no agreement was reached. Not long after, Goldcorp agreed to a 17-per-cent premium takeover by Newmont. Mr. Biswas declined to comment on talks with either Barrick or Goldcorp.

Like a lot of its peers, Newcrest took a series of punishing write downs after the price of gold went into a tailspin in 2012. While its shares have rallied strongly over the past three years, the company is still trading about 60-per-cent below its peak. In recent years, Newcrest has focused on paying down its once sizable debt load.

Newcrest operates mines in Australia, Papua New Guinea and Indonesia. The company also holds a 27-per-cent stake in Vancouver-based Lundin Gold Inc. after investing US$250-million into the junior miner last year.

“Canada stacks up very well from a jurisdiction perspective and some of the quality of the deposits and operations,” Mr. Biswas said.

“It’s certainly on our radar.”

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 02/05/24 8:59pm EDT.

SymbolName% changeLast
Barrick Gold Corp
Lundin Gold Inc
Newmont Mining Corp

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