trending Market Intelligence /marketintelligence/en/news-insights/trending/u4lkygpgjtfehgcbts7kgg2 content esgSubNav
In This List

St Barbara to step up M&A search as gold tipped to dominate


Essential IR Insights Newsletter - April 2023


Masters of Risk | Episode 2: A Discussion with Ilya Khaykin


According to Market Intelligence, April 2023


Discover the Power of S&P Capital IQ Pro

St Barbara to step up M&A search as gold tipped to dominate

St Barbara Ltd. CEO Bob Vassie said hunting a development acquisition or even a merger of equals will consume most of his time over the next 12 months, just as EY released new commentary saying it expects gold to continue to dominate global transactions this year along with coal and steel.

While Vassie had said at the 2017 Diggers & Dealers Mining Forum in Kalgoorlie, Western Australia, that he was keen to do a deal, he said Aug. 8 on the conference sidelines this year, "I'm going to be trying very hard, because it is absolutely the right time for us," particularly given the miner's strong cash position partly driven by the good performance at Simberi.

"It's a really good inflection point for us … Over the course of the next 12 months, it will be most of what I do," the CEO said, referring to St Barbara's search for merger and acquisition opportunities.

"We're looking for significant merger and acquisition opportunities," Vassie said. "There are not too many discreet assets out there that you can buy. We don't really want to be using cash for that, but now that we have a good balance sheet, if we acquired a development project we could build it.

"We're looking at mergers, even up to mergers of equals, where the combination diversifies both parties. For us, it's about diversifying our production because we're reliant on Gwalia."

While Vassie said he does not mind where in Australia the new acquisition is located, somewhere close to Gwalia in Western Australia would provide some synergies. He is also looking at North America, as many others are, given the view that relative valuations have now moved more in favor of Australia, but he is wary that "the Americans and Canadians know how to mine, [and] it's almost as tightly held over there as it is here."

While St Barbara is "not afraid" of Africa, Vassie said, "I'm not going to die on a beach on Africa for 100,000 ounces, relocating a village and starting a new mine," indicating his preference for a tier-one destination.

The CEO said the only way the company would end up there is by merging with a successful African company, thus diversifying its production and finding an asset with long life, which are St Barbara's key criteria for new mergers or acquisitions.

Metals strong but gold stronger

EY's latest quarterly, released Aug. 8, revealed that global mining and metals deal value fell 9.5% year on year in the second quarter, though deal value for strategic mineral assets — which EY said included lithium, nickel cobalt, graphite and vanadium — was up 22% year on year in the first half.

Despite their popularity, strategic minerals are a relatively small part of the market, so EY still expects gold, steel and coal transactions to continue to dominate, having represented 62.5% of deals globally in the second quarter.

EY Oceania Transactions Markets Leader Paul Murphy said in a same-day statement that deal-makers are focused on the most attractive and low-risk projects in what is still a "conservative" environment, and he expects the sector to be driven by investment this year rather than long-term acquisitive growth.

With businesses maintaining their focus on short-term projects, EY said capital-raising activity remained slow during the second quarter and revealed that global aggregate capital raised fell 3% to US$131 billion in the first half, while second-quarter volume was just 6% higher than the previous quarter at 651 deals.

Vassie also said during his presentation that he was working on joint venture opportunities, but as juniors are finding it easier to raise equity now, he will consider equity of "anywhere up to 10% and 19%" depending on the team and the property, which he said could lead to a takeover opportunity down the road.

This is in line with EY's findings, which indicate that while miners remain cautious in their approach to deal-making despite stronger balance sheets, they are looking for joint ventures and strategic partnerships for growth opportunities.