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Gold Price Advance Makes Industry `Ripe' for Acquisitions, Newcrest Says
Newcrest Mining Ltd., set to buy smaller rival Lihir Gold Ltd. for $9.4 billion, said rising gold prices will drive more acquisitions in the industry.
“If gold prices stay in the area they are at the moment, and some pundits are saying they might even go a little higher, you’re going to see a sector which will be ripe with cash,” Chief Executive Officer Ian Smith said today on a conference call with reporters. “That will spur along M&A activity.”
Gold for immediate delivery hit a record $1,265.30 an ounce on June 21 and is headed for a 10th annual gain. Prices may reach at least $1,300 an ounce this year as investors seek a shield against financial turmoil, weak currencies and inflation, according to London-based researcher GFMS Ltd.
Takeovers in the industry have picked up this year because of strong gold prices, Greg Fournier, Hong Kong-based head of the Asia Pacific region metals and mining investment banking at Merrill Lynch, said on Aug. 3. Gold companies have completed or are evaluating $37.5 billion of acquisitions this year, more than double last year’s total, according to data compiled by Bloomberg.
Lihir and Newcrest shareholders last week agreed to an A$10.45 billion ($9.4 billion) share-and-cash deal that will create the world’s fifth-biggest gold producer. The National Court of Papua New Guinea, where Lihir is based, approved the deal on Aug. 27.
Gold output will grow 8.2 percent annually to 3.75 million ounces from 1.76 million ounces for Newcrest and 980,000 ounces for Lihir, Newcrest said today in an e-mailed presentation.
To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net
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