Small gold companies should consider merging to pool sources of funding amid a drop in equity financing, Endeavour Mining Corp. Chief Executive Officer Neil Woodyer said.
This is a “difficult” time for gold companies that need to fund project studies and development, Woodyer said in a phone interview today from Monaco. The value of equity funding and takeovers of small gold companies has declined from last year, according to data compiled by Bloomberg.
“There should be economically more mergers and acquisitions and pooling together of resources,” said Woodyer, whose Cayman Islands-based company agreed in August to buy Avion Gold Corp. for C$377 million ($385 million). “Because there’s always human issues and other factors to consider, people’s view of value isn’t always the same.”
Endeavour shareholders on Oct. 12 approved the company’s acquisition of Avion, which produces gold in Mali. The deal is expected to close Oct. 18, Woodyer said. The company, which already has mines in Ghana and Burkina Faso and is building a new operation in Ivory Coast, will focus on internal growth for the foreseeable future, he said.
There have been 19 gold company takeovers totaling $4.3 billion for companies valued between $50 million to $500 million announced this year, according to data compiled by Bloomberg. By comparison, there were 24 deals valued at $5.43 billion announced in the same period of last year.
While companies including Belo Sun Mining Corp. have successfully sold shares to fund gold projects, the total value raised in equity offerings by mining companies this year has dropped to just $6.19 billion according to data compiled by Bloomberg, compared with $20.32 billion in the same period of 2011.
Endeavour fell 2.1 percent to C$2.35 at the close in Toronto. The shares have dropped 3.3 percent this year, less than the 7.4 percent decline for the Standard & Poor’s/Toronto Stock Exchange Gold Sector Index.