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Mining managers see opportunities

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2021 has been another lousy year for precious metal mining investors. Year-to-date the HUI index of unhedged gold or silver miners has shed about 16%. The yellow metal closed 2020 at $1898/Oz and is in for a modest decline at around 5% over 2021. Precious metal mining CEO’s look at the scene from a different angle.

With gold meandering around $1800/Oz, miners continue generating hefty margins, even though investment and operating costs are creeping up. Moreover, gold has been upholding well or even firming in nearly all world currencies, except for the USD.

Precious metal mining CEO’s see opportunities in this perspective. Several recent mergers and acquisitions are a clear indication. To refresh your memories, a short overview:

  1. Agnico Eagle (AEM) is to merge with Kirkland Lake Gold (KL)
  2. Kinross Gold (KGC) is going to acquire Great Bear Resources (GBR)
  3. Lundin Mining (LUG) is to acquire the JoséMaria copper-gold project (JOSE) in Argentina for C$625 M. 
In the streaming and royalty business, some consolidation is likewise ongoing: Gold Royalty Corporation, led by David Garofalo, is joining efforts with Abitibi Royalties and Golden Valley Resources.  Furthermore, Gold Royalty Corp. has announced its intention to acquire Elemental Royalties Corp.

Mining CEO’s are determined not to make the same mistakes their predecessors made in 2010-2011, when hefty premiums were paid for acquisitions, burdening the balance sheet and destroying shareholder value. In the perspective of the gold price retreating from its Aug 2011 all-time-high and deepening its loss in a four year bear market, all prior mining acquisitions were also ill-timed.


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