Royal Gold agrees acquisitions worth $3.7bn as record prices drive deals

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favorite tales on this weekly publication.Mining royalty firm Royal Gold has agreed two acquisitions value $3.7bn, within the newest offers to indicate how file bullion costs are driving consolidation within the extremely fragmented sector.The Nasdaq-listed firm mentioned on Monday it might purchase Toronto-quoted Sandstorm Gold in an all-share $3.5bn transaction, and would additionally purchase Horizon Copper — whose greatest shareholder is Sandstorm — for $196mn in money. The offers have been agreed by the boards of all three firms and are set to make Royal Gold one of many world’s prime streaming firms, which pay mines upfront for a future “stream” of their output or royalties on earnings.Surging costs have boosted profitability for gold miners and streaming firms, despite the fact that the 2 have completely different enterprise fashions. The historic bullion rally has additionally contributed to a recent bout of dealmaking.“Excessive commodity costs are inclined to enthuse the animal spirits,” mentioned Kieron Hodgson, an analyst at Peel Hunt. “There’s a component of consolidation, each for progress and for optionality”.He mentioned greater bullion costs had intensified competitors for high quality initiatives amongst streaming firms.The gold value has virtually doubled prior to now two years and touched a recent excessive of $3,500 per troy ounce in April.Final yr, gold offers accounted for 70 per cent of dealmaking by worth within the mining sector, based on S&P World, and analysts count on that development to proceed.The biggest gold mining offers final yr included AngloGold Ashanti’s $2.5bn takeover of Centamin and Northern Star’s $3.3bn buy of De Gray.Offers this yr included CMOC’s $581mn buy of Lumina Gold in April, in addition to Australian gold miner Ramelius Sources’ $1.5bn takeover of Spartan Sources in March.After the transactions, Royal Gold expects its market capitalisation to rise from $11.9bn to about $15.4bn, based on firm figures. The world’s largest streaming firms are Wheaton Treasured, valued at $41.2bn, and Franco-Nevada at $32bn.Royal Gold chief government Invoice Heissenbuttel mentioned: “The transactions will reinforce our place as the one large-cap, gold-focused streaming and royalty firm domiciled within the US.”After the transactions are full, Royal Gold’s portfolio will double to 80 producing belongings, with an extra 266 mines on the exploration part. About three-quarters of the revenues of the expanded firm will come from gold, with the remaining from silver and copper.All three firms would require shareholder approval earlier than the completion of the deal, which is predicted within the fourth quarter of this yr.