Further merger and acquisition activity is believed to be brewing in the Australian gold mining sector, with speculation mounting that a substantial deal is in the works in Western Australia involving two producers of the precious metal.
It comes as gold miners continue to experience buoyant conditions thanks to the soaring price of the commodity.
The Australian gold price hit a record of $2873.56 per ounce on August 6, driven by the weakening US dollar and the search by investors for diversification.
At that time, gold was up 33 per cent from the start of the year, but it has since eased off and late on Wednesday it was trading at $2651 per ounce.
When it comes to possible candidates for a major gold mining transaction in WA, some have pointed to the $875m Australian-listed gold miner Bellevue Gold as a potential target. The company is run by managing director Steve Parsons and counts former Northern Star executive Luke Gleeson as its head of corporate development.
Bellevue was understood to have been shopped around the market about a year ago by Canaccord Genuity to mining companies such as Evolution Mining. However, the company was not sold because there were no offers at a high enough price.
Most in the market believe that the members of management are sellers at the right price because they are not considered asset developers.
One theory is that there could be talks about a tie-up with fellow Australian-listed gold miner Silver Lake.
Silver Lake Resources, which has a $2.13bn market value, has a portfolio of older assets and the Bellevue projects, consisting of the development of new gold discoveries, may make sense for the company.
With its share price also soaring, it could potentially embark on an acquisition by paying for the target with scrip, in a move that could value Bellevue at about $1.2bn.
However, market experts say that Silver Lake’s chief executive Luke Tonkin is conservative when it comes to corporate activity and could be unlikely to make such a major bet.
Others say that Silver Lake could find cheaper targets.
The other logical and previously mooted deal that could be unfolding is a merger between larger gold miners Saracen Minerals, which has a market value of $5.7bn, and the $10.3bn Northern Star Resources.
Both jointly own the major Super Pit gold mining project in Western Australia.
The companies are said to have a similar culture and a good relationship exists between both.
Northern Star, which with a strong balance sheet is well placed to make acquisitions, is run by Stuart Tonkin, while Saracen counts Raleigh Finlayson as its chief executive.
Investors in the Australian gold mining space have lobbied for consolidation via mergers for some time.
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