The great gold roll-up has been a long time coming. Transactions in the space may have been eye-catching, such as Newmont’s $19bn bid for Newcrest last year, but they are best characterised as a trickle. AngloGold Ashanti’s £1.9bn bid for UK-listed Centamin is a sign that the pressure for consolidation is building.
The US-listed miner is taking advantage of its glittering share price run to nab itself a reasonable deal. At yesterday’s close, Anglo’s stock was up almost 60 per cent, year to date, compared with Centamin’s 20 per cent rise. That means it can afford to offer a chunky 37 per cent premium and still value Centamin at just 3.9 times this year’s ebitda, on Morgan Stanley numbers, compared with its own 4.5 times. Synergies have been hinted at rather than quantified: there will be some head office and procurement savings. It may also be able to make more of Centamin’s star asset, the low-cost Sukari gold mine in Egypt, given its larger balance sheet and operational capabilities.
Investors should expect more of this sort of opportunistic bid. The gold sector needs consolidation. It is fragmented, with tens of companies in the $1bn-plus market cap range. On top of that, under-investment in exploration has led to a dearth of new projects, and companies are increasingly keen to snap up each others’ resources.