Recent megamergers in gold
The report from Bloomberg about the potential sale of all or parts of IAMGOLD’s (IAG) business comes as the gold sector is going through a wave of consolidation. In September 2018, Barrick Gold (GOLD) announced a merger with Randgold Resources, which the companies completed on January 1. On January 14, Newmont Mining (NEM) announced its plans to merge with Goldcorp. The two companies finally merged on April 18.
Consolidation in the gold sector
Gold miners (GDX) haven’t kept up with broader equities (SPY) (IVV) or gold (GLD), having lost favor with institutional investors after making M&A (merger and acquisition) decisions at the peak of the commodity cycle, which resulted in high debt. Moreover, the world’s economically accessible reserves are dwindling, and gold miners (NUGT) need to find more reserves to keep their production pipelines full. Therefore, when reserve discoveries slow down, M&As may be miners’ next logical steps to stay in business and grow.
IAMGOLD’s recent ratings
IAMGOLD stock has seen several downgrades in the last few months, as analysts are concerned about the sustainability of its Westwood project, which has shown increased seismicity of late, affecting its results. Moreover, IAG’s first-quarter results were much weaker than expected, disappointing investors and analysts. IAG could review its guidance for 2019 during the second quarter after a weaker first quarter, which could mean further downside in its stock.