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Are Slowing Production Pipelines Fueling Gold Miner M&A Activity?

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Long-term production growth

The production growth for most miners (GDX) (JNUG) is either in decline or flat at best. As the discoveries have become rarer, miners have opted for mergers and acquisitions to drive growth.

Newmont Mining (NEM) agreed to acquire Goldcorp (GG) on January 14. You can also read Could the Newmont-Goldcorp Merger Form ‘The Go-To Gold Equity’? for more details on the merger between Newmont and Goldcorp. The new company will combine Newmont’s 68.5 million ounces and Goldcorp’s 52.8 million ounces to form the world’s largest asset base. After selling non-core assets, the new company is expected to maintain annual gold production of 6.0 million–7.0 million ounces.

Newmont Mining (NEM) has one of the best project pipelines in the sector (GDX) (GDXJ).

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Barrick-Randgold merger

Barrick Gold (GOLD) and Randgold Resources’ merger was completed on January 1. Read Is Barrick Worth a Look after Its Merger with Randgold? to learn more. The combined company is expecting to produce 5.1 million–5.6 million ounces of gold in 2019, which implies 18% growth at the midpoint of the guidance range.

Growth project threatened

Kinross Gold’s (KGC) Tasiast expansion phase one was completed in 2018 and it achieved record quarterly production in Q4 2018. The fate of Tasiast Phase 2, however, remains undecided, as the government of Mauritania is seeking to participate more in Kinross’s activities in the country. While investors are hoping for a speedy process of negotiations, Kinross’s medium-term production growth profile does not offer much to cheer about.

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