Golden chance for miners to buy rivals amid commodity sell-off

Australian gold stocks sold off on Thursday as the US dollar rallied following a Donald Trump election victory.

A sell-off in gold stocks on Thursday following the US election result could see a raft of groups that were looking to raise cash before Christmas pare back the size and price of their deals.

Record high gold prices have prompted Australian listed gold miners to capitalise on their booming share prices trading off the back of the strong sentiment surrounding the commodity.

But on Thursday, share prices of gold companies came under substantial pressure, with groups such as Northern Star, Spartan, Ramelius, Evolution Mining, Regis Resources and most others in the sector down by more than 5 per cent.

Groups that have strong cash balance sheets may try to capitalise on the opportunity by acquiring peers at their cheaper prices now that stocks have weakened.

The obvious play is for Ramelius Resources to move on Spartan, which saw its shares fall by more than 15 per cent on Thursday, taking its market value to $1.7bn or $1.25 a share after it hit a 2024 high last month of over $1.60.

Ramelius, which is in a $455m net cash position, pounced on Spartan in June, buying an 8.9 per cent stake at 92c, so perhaps the stock needs to fall further before it becomes interesting for a deal.

Northern Star is also in a strong position for a buyout, with $358m of net cash, and the most logical target is rival miner De Grey Mining, also off more than 5 per cent.

Part of the reason behind a rally in the gold price in the past two months has been linked to expectations of geopolitical instability and an uncertain outcome of the US election.

But the sweeping Donald Trump victory in the race for the White House has caught out some trading in the stock, in that the strong result has created more certainty surrounding policy out of the US.

Also sending the gold price lower is a rally in the US dollar following the election, where the economy is expected to be stronger under Trump.

However, while gold may stay volatile for about two months as the market assesses the impact of Trump’s leadership, if he introduces trading tariffs on other countries as expected, such as China, and the US dollar remains high, that would lead to global inflation.

And inflation usually supports a higher gold price.

The same would be said with more geopolitical tension under Trump.

Groups that were also looking to raise equity may now have second thoughts over doing so before Christmas, or may raise less funds and at a lower price.

Another plus for gold miners wanting to do deals following the election of Trump is that it may be easier to come across financing for transactions at better rates, say sources.