Randgold Resources Ltd. (RRS), the best- performing London-traded gold producer this year, said West African gold developers’ discoveries are too small to make them attractive takeover targets for major producers.
“You have all these little projects being developed, and the juniors promoted them in the expectation that someone would buy them and develop the mine,” Mark Bristow, chief executive officer of the St. Helier, Jersey-based company said yesterday in an interview. “The juniors overpromoted their projects, the big guys didn’t come and buy them, and now they’re stuck there holding them.”
Companies are working to boost gold production as prices for the precious metal hit record highs and are on course for an 11th straight annual gain due to concerns over global growth and sovereign debt. There were $20 billion of gold takeovers during the second quarter, the most in at least 10 years, according to data compiled by Bloomberg.
“Consolidation will be more amongst West African gold juniors rather than any major taking them over,” Anna Kassianos, resources analyst with Austock Securities Ltd. in Sydney, said by phone. She named Perseus Mining Ltd. (PRU) and Resolute Minerals Ltd. as examples of companies that could be merged to make a good-sized gold business.
Randgold gained 0.4 percent to 7,070 pence at 11:14 a.m. London time, boosting gains since the start of this year to 34 percent.
20 Percent Return
Randgold’s development projects must contain at least 3 million ounces of gold reserve and offer a 20 percent return at a gold price of $800 an ounce, Bristow said.
“If you look at these juniors in West Africa, they’re worth more than $1 billion and they haven’t even got 1 million ounces,” said Bristow.
Bristow plans to boost output from Randgold’s mines in Africa to over 1.2 million ounces in 2015 from about 750,000 ounces this year.
Gold for immediate delivery was little changed at $1,865.97 an ounce at 11:13 a.m. in London after gaining 31 percent since the start of the year.
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