Gold fever
Canada-based Goldcorp Inc. announced it would acquire rival gold miner USA-based Glamis Gold Ltd. for $7.8 billion in stock. The deal will make Goldcorp the #5 world gold company, after Canada's Barrick Gold and the US's Newmont Mining, It would be the second biggest deal in metals ever, second to Barrick Gold's acquisition of Placer Dome for $10.4 billion, in March of 2006.
Both Goldcorp and Glamis have already been in an acquiring mood. In fact, Goldcorp bought Placer Dome's Canadian operations for $1.6 billion in cash as a spin-off of that deal. Goldcorp bought Wheaton River Minerals Ltd. in a $2.2 billion deal in 2005. Glamis bought Western Silver in February 2006 for about $1 billion
The move comes as gold prices have doubles over the last four years. The betting is that higher metals prices are here to stay, not to sink again, as has happened so often in the past. Demand for China and uncertainly about the dollar will, acquirers hope, keep gold and metals riding high.
According to one precious metals industry analyst: "Consolidation is occurring in all the mining industries, and it's occurring in gold, alumina, steel and base metals…At the moment, it may be easier to buy than to build with the spike in capital costs." ("Goldcorp to acquire Glamis for $8.6 billion", Bloomberg, 9/1/2006.
Another analyst is quotes as saying: "There are more deals going on as mining companies have more cash, and less to spend it on," ( "Gold fever spurs frenzy of mining acquisitions. ". Financial Times, 9/1/06). .
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