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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Tunica Albuginea who wrote (42667)	10/11/1999 12:46:00 PM
From: Alex	Respond to of 116764

ANALYSIS-More gold mine M&A seen amid hedge fears By Marius Bosch LONDON, Oct 11 - The map of the gold mining industry is about to change on news of two major new acquisition bids and unravelling hedge positions of some miners could bring yet more upheaval, analysts said on Monday. With the gold price on a recovery path and trading at levels not seen in almost two years, gold companies are valued at significantly higher levels and takeover bids or acquisitions delayed by bullion's poor outlook might now be pursued. Gold rallied sharply following a September 26 pledge by 15 European central banks to limit official sales. But before that gold producers had watched profits dwindle with the falling bullion price, which forced internal restructuring to cut costs, said Simon Village, head of global mining at HSBC Securities. Potential acquisitions were put on the backburner as gold slumped to a 20-year low of $251.70 in late August. "The multiples now in the market are such that some of these mergers become attractive because their paper (shares) now are valued or rated at a better level. "The big fish were sitting there, like the Anglos, Barricks and Newmonts, saying we are going to wait for a great degree of distress in the market. The gold price running up has re-rated some of the acquisitions and I think the guys have said 'we may as well do the deal on a paper basis'," Village said. MERGERS EXPECTED IN AUSTRALIA, NORTH AMERICA South Africa's AngloGold Ltd , the world's biggest producer, on Monday launched a $541 million scrip take-over bid for Australia's Acacia Resources Ltd . And Lonmin Plc said it made an all-share bid for Ghana's Ashanti Goldfields Co Ltd , conditional on resolving Ashanti's gold price hedging crisis. Ashanti fell victim to the sharp surge in gold prices when it ran into margin calls from counterparties to its hedging deals, leaving the company with a potential $450 million loss. Analysts said they expected more mergers to take place in Australia and North America. "I think we will see more mergers, definitely in Australia and probably in North America. "The South Africans have been merging on a fairly regular basis, there might be little bit more room to manoeuvre," said Michael Coulson, analyst at Paribas Capital Markets in London. Most South African gold producers, faced with extracting dwindling gold ore at increasing depths, have undergone far-reaching rationalisation processes, creating more streamlined firms needed to compete in the global gold mining industry. MINERS HOLDING OUT FOR BETTER DEALS Low gold prices had forced the gold mining industry to look at mergers or takeovers, HSBC Securities' Village said. "The industry got itself into a position where there needed to be mergers, some companies just weren't going to make it. "The reason it was so delayed, is that people try and hang on until the bitter end, especially when they are under pressure and their back is against the wall because they know they are going to get a bad deal," he added. Kamal Naqvi, precious metals analyst at Macquarie Equities Ltd, said more producers might be in trouble over their hedge books. "We suspect that we will see more problems to come from North American and South African producers as they have been relatively new entrants to the hedging business and have substantially increased their position over the last four quarters," Naqvi said. He said producers with a high proportion of reserves sold forward, little cash to pay for margin calls and those that have sold a lot of call options due in 1999 or 2000 around current gold prices, might have problems with their hedge positions. Analysts said giant Canadian miner Barrick Gold Corp and South Africa's Western Areas Ltd and Randfontein Estates faced potential risk from their hedge positions. But unlike Ashanti, Barrick and other gold miners might have a stronger balance sheet to stave off any potential margin calls. "It seems to me the Ashanti fellows have really gambled the whole mine away," said Rene Hochreiter, analyst at Barnard, Jacobs and Mellet in Johannesburg. "You will find that any merger at the moment will be a distress merger rather than a logical merger," Hochreiter added. uk.news.yahoo.com