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Paulson's gold investor coalition urges midtier miners to merge, cut costs

The Shareholders Gold Council, an investor coalition led by New York hedge fund Paulson & Co, called for more zero-premium mergers among midtier gold companies to eliminate duplication and slash corporate costs to enhance shareholder returns, Reuters and the Financial Times reported Sept. 12.

Reducing the 24 midtier companies the group analyzed by half would generate between US$2.4 billion and US$3.2 billion of value for shareholders, the FT added.

Golden Star Resources Ltd., Jaguar Mining Inc., Petropavlovsk PLC, Dundee Precious Metals Inc. and Eldorado Gold Corp. have the highest spending levels, the group added.

Meanwhile, it said that the 13 largest gold producers, including Barrick Gold Corp., Newmont Goldcorp Corp. and Newcrest Mining Ltd., spend almost twice as much than nongold miners.

The council believes that excessive costs need to be reduced for further growth of the sector, which outperformed the gold price in 2018 by rising 53%, compared to a growth of 26% in gold prices during the period.

The group added that if gold producers bring their governance and administrative levels in line with other mining peers, US$13 billion of value could be unlocked for shareholders, according to Reuters.

Gold jumped to its highest level since 2013 this month, hitting US$1,503.04 per ounce amid global growth concerns and trade uncertainties, according to Reuters.

Recently, the World Gold Council, an industry association composed of some of the biggest gold miners in the world, launched guidelines to address key environmental, social and governance issues for the gold mining sector.