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So much for the run on cheap gold mines. Producers who were forced by slumping prices to unload assets last year are regaining leverage.
With bullion off to its biggest rally to start a year in four decades aided by the U.K.'s vote to quit the EU mine buyers are paying higher premiums and the pace of deals is accelerating, data compiled by Bloomberg show.
The value of reserves held by major producers has almost doubled since the third quarter of last year, according to Bloomberg Intelligence.
The revival comes after a three-year slump led to losses, rising debt and a fire sale of assets. With valuations dropping, private equity firms and companies including Zijin Mining Group Ltd. pounced.
The number of acquisitions worth at least $1 million rose 14 percent last year to 192, the first increase since 2010, data compiled by Bloomberg show.
But now investors are pouring money into gold funds, and prices are near the highest in more than two years, boosting premiums for available mining assets that are getting harder to find.
"Scarcity of high-quality targets, both producing and development-stage, is more of a factor than bargain-hunting," said Michael Siperco, an analyst at Macquarie Capital Markets in Toronto.
"We could see potential acquirers more willing to pull the trigger on transactions, given the improving near and longer-term macro environment for gold."
The average premium paid on deals worth at least $1 million is about 42 percent in the current quarter, up from 29 percent in the first quarter, data compiled by Bloomberg show.
The 63 deals pending or completed in the quarter are the most since the fourth quarter of 2011, the year that bullion surged to a record high of $1,921.17 an ounce.
Teranga Gold Corp., a Toronto-based producer, agreed on June 20 to buy Gryphon Minerals Ltd., based in Subiaco, Australia, at a premium of 53 percent, based on the closing price before the deal was announced.
That compares with an estimated 33 percent premium given by Vancouver-based Goldcorp Inc., the world's largest producer, when it agreed in May to acquire Kaminak Gold Corp.
Gary Goldberg, the chief executive officer of Newmont Mining Corp., the largest U.S. bullion producer, said Thursday that the company is keeping an eye on acquisition opportunities.
Gold has rallied 24 percent this year, heading for the best first half of any year since 1974. Prices touched $1,358.54 on June 24, the day after a U.K. plebiscite showed a majority wanted to exit the EU, a vote dubbed Brexit, prompting investors to stock up on bullion as a haven as global equity markets plunged.
Bullion for immediate delivery traded little changed at $1,320.59 at 11:27 a.m. in New York.
"Brexit has given gold deals even more of an advantage as gold surged, and the interest in gold continues to build momentum," said Kenneth Hoffman, senior metals and mining analyst at Bloomberg Intelligence in Princeton, N.J.
Even before the so-called Brexit vote, valuations were improving. A gauge of 14 senior gold producers tracked by Bloomberg Intelligence has more than doubled this year.
On average, their reserves were valued at $178.43 an ounce in the second quarter, the highest since the first quarter of 2013, data compiled by Bloomberg Intelligence show. In the third quarter last year, the average was $90.90.
Investors have been flocking to gold this year amid signs that the U.S. will keep interest rates lower for longer than previously forecast.
Those concerns were compounded after Brexit, when yields on more than $9 trillion of bonds slide below zero.
That means anyone who buys debt today will lose money if they hold the bonds to maturity, which boosts the appeal of gold as a store of value as prices rise.
While the rally boosted the value of gold deposits, it also improved the cash flow available for mining companies looking to acquire assets.
Chinese producers have already made $1.2 billion of deals in the quarter, the most in a year, according to data compiled by Bloomberg Intelligence.
"There's competition for these assets," Hoffman said. "The small miners tend to worry more about private equity. The large miners worry about China. The Chinese have really shown an appetite for gold deals, and so they could get themselves in the bidding wars."
Shandong Gold Mining Co. and Zhongjin Gold Corp. are among the potential bidders for Glencore's gold mine in Kazakhstan, according to people familiar with the matter.
Glencore may be seeking about $2 billion for the asset, the people said, asking not to be named because the deliberations are private. Zijin Mining, one of China's largest producers, may be interested in the Vasilkovskoye mine, which Glencore put on the auction block earlier this year, the people said.
About half of gold companies surveyed by Macquarie indicated they were now more inclined toward mergers and acquisitions than six months ago. The primary obstacles, according to two-thirds of respondents, were the availability of quality targets and high valuations.
"A lot of them missed opportunities to buy things on the cheap that were distressed when gold prices were lower," said Dan Denbow, a portfolio manager at the USAA Precious Metals & Minerals Fund in San Antonio, which oversees $751 million. "If anybody was strategically looking at replacing exploration dollars by doing acquisitions, they would have been better off doing it when assets were much cheaper, six months ago. Now they're having to pay for a bit of premium."