Are M&A's the key to reviving the gold industry in Australia?
Mergers and acquisitions (M&A) in Australia hit a ten-year low in 2014, aiding to the collapse of investor confidence and the downturn in the gold sector.
In recent months, however, Australia has been riding a wave of positivity as gold prices rise, costs lower and more favorable currency conditions occur. The answer: mergers and acquisitions.
• Related content: 2015: Year of the Mega Mergers
"Everyone is looking for assets that enable them to grow. We've seen more M&A in Australia in 2015 than in the past five years," Ian Murray, chairman of Perth-based Gold Road Resources Ltd told Reuters,
So far this year, Australia’s merger and acquisition activity in the gold sector has seen 26 announced deals worth more than $1.7 billion.
Recent deals include Evolution Mining acquiring Barrick Gold’s Cowal mine for $550 million and Newcrest Mining’s exploration deal with Mungana Goldmines Limited to explore for copper-gold in North Queensland.
“We are already starting to see that in completed deals, with gold accounting for more than a quarter of all global deals by value during the first quarter – and we have continued to see it in announced deal activity,” said Murphy.
As confidence in adjusted cost bases grew, and the cycle stage by commodity became more apparent, investors, including financial investors, were likely to begin taking stronger positions in the sector. Adding fuel to the M&A frenzy are cuts in central bank interest rates, aimed at lowering the Australian dollar.
• Related content: [CHART] Timeline of Mining Mergers and Acquisitions
"Assets are being sold at a low point in the cycle and if you position yourself to accumulate them, you are going to do very well,” Evolution Executive Chairman Jake Klein told Reuters.
The gold sector in Australia is expected to have an exciting year in 2015. As major miners continue to slim down in an effort to reduce debt, it will enable local producers to pick up assets at favorable prices. In return, the investment attention in Australia may return very soon.
BHP, Rio Tinto & Vale launch Charge On Innovation Challenge
Mining giants BHP, Vale and Rio Tinto have launched the 'Charge On' Innovation Challenge to solve one of the biggest challenges the industry faces today - decarbonising mining operations.
'Charge On' Innovation Challenge
In partnership with Austmine, Australia's leading mining equipment, technology and services industry association, founding patrons BHP, Vale and Rio Tinto have launched the competition to encourage technology innovators to develop new concepts for large-scale haul truck electrification systems. The main goal is cutting emissions from surface mining operations.
“The mining industry needs to be at the forefront of tackling the climate challenge. The Charge On Innovation Challenge is a great example of the current collaborative work being done by the mining industry and mobile equipment manufacturers to decarbonise mining fleets,” the trio said in a media statement.
“In addition to providing a zero-carbon energy source, the conversion of mobile mining equipment to battery-electric can potentially unlock value, as electric motors have fewer moving parts when compared to standard equipment.”
A number of non-traditional mining sector vendors are actively developing technologies that can assist in mine electrification. By submitting a Challenge to the market, the Patrons of Charge On expect to:
- Demonstrate there is an emerging market for charging solutions in mining
- Accelerate commercialization of solutions
- Indicate to suppliers, the mining industry seeks interoperable solutions
- Maintain multiple actors and competition in the supply chain
- Integrate innovations from other sectors into the mining sector
"We expect some solutions identified in the Challenge could provide propulsion to existing diesel-electric trucks. This may present a pathway to early implementation for dynamic charging solutions," the trio said.
Found patrons BHP, Vale and Rio Tinto are pledging their commitment to fighting climate change:
"The mining industry has an important role to reduce emissions and do our part to achieve the Paris Agreement goals to limit the impacts of climate change."
The Charge On Innovation Challenge asks vendors to present interoperable solutions that can safely deliver electricity to large battery-electric off-road haul trucks in a way that maintains or improves current productivity levels. Specifically, mechanisms capable of delivering in the order of 400kWh of electricity to each truck within a haul cycle (ie load, travel, dump, return, queue). The delivered electricity is to charge a battery, and if applicable directly propel the truck.
Austmine CEO Christine Gibbs Stewart commented: “We expect the Challenge will attract companies from a broad range of sectors including mining, automotive, aerospace, agriculture, and defence to deliver selected charging concepts to create a standard product that can interface with all trucks."
More information about the challenge will be released on May 18.
The competition echoes growing efforts being made across the industry to tackle emmissions and promote electrification. In march this year, the Electric Mine Consortium was launched. It's founding members include Gold Fields, Dassualt Systemes and Sandvik who pledged their commitment to decarbonising mining operations.