Medusa, Kingsgate Gold Producers May Be Takeover Targets, Citigroup Says

Medusa Mining Ltd. and Kingsgate Consolidated Ltd. may be takeover targets as part of a “wave of consolidation” in the mid-size sector of the Australian gold industry, Citigroup Inc. said.

“We believe that M&A activity is likely to continue in the Australian gold space,” Citigroup analysts led by Craig Sainsbury said in a report yesterday. “We believe it’s better to buy a basket of junior producers with solid fundamentals, leverage and M&A potential for your gold exposure rather than” Newcrest Mining Ltd., they said.

GoldCorp Inc., the second-biggest Canadian gold producer, last week agreed to buy Perth-based Andean Resources Ltd. for C$3.6 billion ($3.5 billion) and Newcrest, the biggest Australian gold company, has bought Lihir Gold Ltd. Global gold mining takeovers are at a record this year as producers are discovering less metal while the bullion price has advanced each year since 2001.

“We believe that there will likely be a wave of consolidation in the mid-tier gold sector as 100,000 to 200,000 ounces a year producers scramble to build size,” the analysts said.

Medusa gained 2 percent to A$4.50 at 11:45 a.m. on the Australian stock exchange. Kingsgate gained 2.2 percent to A$10.90. Citigroup has a target of A$5.00 on Medusa and A$12.00 on Kingsgate.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

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