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China’s Zijin agrees to buy Canadian gold miner for $1bn
Industry consolidation accelerates after two megadeals in past year
Neil Hume, Natural Resources
Editor YESTERDAY
China’s state-backed Zijin Mining Group has agreed to buy Continental Gold for $1bn, as the industry’s consolidation accelerates.
Zijin said it would pay C$5.50 a share for Toronto-listed Continental, a 13 per cent premium to its closing price on Friday.
Analysts have expected another burst of dealmaking in the sector since Barrick Gold bought Randgold Resources for $6bn last year, and Newmont Mining then swooped on GoldCorp in a $10bn transaction in January.
The deal is also the latest for Zijin, which has embarked on an acquisition spree in recent years to diversify its earnings.
Bankers have long predicted Chinese miners would join the sector’s consolidation given the metal’s strategic importance to Beijing. Gold has risen 14 per cent this year.
Continental is developing the Buriticá mine in Colombia, one of the world’s largest and highest-grade gold projects.
The mine is due to come on stream next year and should be capable of producing up to 300,000 ounces of gold a year.
Newmont Goldcorp, which holds an almost 20 per cent stake in Continental, is supporting Zijn’s takeover. Shares in Continental climbed 10 per cent in late-morning trading in Toronto.
The tie-up comes a week after Canada’s Kirkland Lake Gold agreed to buy Detour Gold for $3.7bn, marking the latest deal to involve a company with just one mine.
There is an abundance of such single-asset gold companies, many listed in Canada, that analysts say lack the scale to reach the radar of more generalist investors.
However, boardroom intransigence and a reluctance to pay big premiums has stymied deals. Shares in Kirkland Lake fell sharply after it announced plans to buy Detour.
Earlier this year, Zijn completed the $1.4bn purchase of Nevsun Resources, and has invested in Kamoa, a large copper project in the Democratic Republic of Congo being developed by Ivanhoe Mines.
It also has 47.5 per cent of Porgera, a gold mine in Papua New Guinea. In recent months the company has been linked with a bid for Lumwana, the Zambian copper mine Barrick Gold is looking to sell.
“Continental also holds a sizeable and highly prospective land package in Colombia that, combined with the Buriticá project, provides Zijin with the leading position in an emerging world-class gold producing region,” said Zijin’s chairman Chen Jinghe.
While Colombia is rich in mineral resources, the country is largely unexplored and Buriticá is seen as a key test for large-scale underground mining.
The project has not been without its problems. Last year, gunmen killed four employees in two separate attacks.
“The timing is right for Continental to sell to a more experienced mine operator,” said Continental’s chief executive Ari Sussman. Separately, Newmont, the world’s biggest gold producer, announced plans to repurchase $1bn worth of shares and said output would be 6.7m ounces in 2020 at an all-in cost of $975 an ounce.
https://www.ft.com/content/31371ff0-14ff-11ea-8d73-6303645ac406
Industry consolidation accelerates after two megadeals in past year
Neil Hume, Natural Resources
Editor YESTERDAY
China’s state-backed Zijin Mining Group has agreed to buy Continental Gold for $1bn, as the industry’s consolidation accelerates.
Zijin said it would pay C$5.50 a share for Toronto-listed Continental, a 13 per cent premium to its closing price on Friday.
Analysts have expected another burst of dealmaking in the sector since Barrick Gold bought Randgold Resources for $6bn last year, and Newmont Mining then swooped on GoldCorp in a $10bn transaction in January.
The deal is also the latest for Zijin, which has embarked on an acquisition spree in recent years to diversify its earnings.
Bankers have long predicted Chinese miners would join the sector’s consolidation given the metal’s strategic importance to Beijing. Gold has risen 14 per cent this year.
Continental is developing the Buriticá mine in Colombia, one of the world’s largest and highest-grade gold projects.
The mine is due to come on stream next year and should be capable of producing up to 300,000 ounces of gold a year.
Newmont Goldcorp, which holds an almost 20 per cent stake in Continental, is supporting Zijn’s takeover. Shares in Continental climbed 10 per cent in late-morning trading in Toronto.
The tie-up comes a week after Canada’s Kirkland Lake Gold agreed to buy Detour Gold for $3.7bn, marking the latest deal to involve a company with just one mine.
There is an abundance of such single-asset gold companies, many listed in Canada, that analysts say lack the scale to reach the radar of more generalist investors.
However, boardroom intransigence and a reluctance to pay big premiums has stymied deals. Shares in Kirkland Lake fell sharply after it announced plans to buy Detour.
Earlier this year, Zijn completed the $1.4bn purchase of Nevsun Resources, and has invested in Kamoa, a large copper project in the Democratic Republic of Congo being developed by Ivanhoe Mines.
It also has 47.5 per cent of Porgera, a gold mine in Papua New Guinea. In recent months the company has been linked with a bid for Lumwana, the Zambian copper mine Barrick Gold is looking to sell.
“Continental also holds a sizeable and highly prospective land package in Colombia that, combined with the Buriticá project, provides Zijin with the leading position in an emerging world-class gold producing region,” said Zijin’s chairman Chen Jinghe.
While Colombia is rich in mineral resources, the country is largely unexplored and Buriticá is seen as a key test for large-scale underground mining.
The project has not been without its problems. Last year, gunmen killed four employees in two separate attacks.
“The timing is right for Continental to sell to a more experienced mine operator,” said Continental’s chief executive Ari Sussman. Separately, Newmont, the world’s biggest gold producer, announced plans to repurchase $1bn worth of shares and said output would be 6.7m ounces in 2020 at an all-in cost of $975 an ounce.
https://www.ft.com/content/31371ff0-14ff-11ea-8d73-6303645ac406
