Mining
Mining M&A Has Nowhere To Go But Up In 2015 [Chart]
![Mining M&A Has Nowhere To Go But Up In 2015 [Chart]](https://www.visualcapitalist.com/wp-content/uploads/2015/04/mining-ma.png)
Mining M&A Has Nowhere To Go But Up In 2015 [Chart]
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
This week, Alamos Gold and AuRico announced a merger worth $1.5 billion. This is all while broad speculation continues that former Xstrata boss Mick Davis is looking to finally deploy his $5.6 billion war chest held by his company, X2 Resources.
Common wisdom is that the majority of mergers and acquisitions (M&A) such as these take place at both the peaks and the troughs of the market. In this week’s Chart of the Week, we wanted to take a look at the truth of this statement over the last dozen years.
The answer: the number of deals peaked in the aftermath of the Financial Crisis in 2009 and 2010. During this time, the overall market dropped off and subsequently recovered with the commodity supercycle still intact. The average value per deal was very low post-crisis, steadily increasing until 2011 when the junior market would reach its most recent heights.
During hot market years, M&A activity was frequent and significant. In years such as 2006, 2007, and 2011, both the cumulative value and the average value per deal were at their highest rates. In the down year of 2013 the data was also relatively positive, but it was also skewed by the $90 billion merger of Glencore and Xstrata. Not including this outlier, it would appear that the data point would be more inline with the trend.
Last year, there were 544 deals for the unimpressive total of $44.6 billion. The volume of deals and their cumulative value reached their lowest points since 2003 and 2004 respectively. Most deals in 2015 will follow suit from the previous year, serving defensive and conservative means such as the Alamos and AuRico merger.
However, if Mr. Davis or like-minded groups start dipping into their war chests, that will mark the beginning of something new: the tilting to the speculative side of M&A that traditionally is a prelude to market recovery.
Mining
Visualizing the New Era of Gold Mining
This infographic highlights the need for new gold mining projects and shows the next generation of America’s gold deposits.
Visualizing the New Era of Gold Mining
Between 2011 and 2020, the number of major gold discoveries fell by 70% relative to 2001-2010.
The lack of discoveries, alongside stagnating gold production, has cast a shadow of doubt on the future of gold supply.
This infographic sponsored by Novagold highlights the need for new gold mining projects with a focus on the company’s Donlin Gold project in Alaska.
The Current State of Gold Production
Between 2010 and 2021, gold production increased steadily until 2018, before leveling and falling.
| Year | Gold Production, tonnes | YoY % Change |
|---|---|---|
| 2010 | 2,560 | - |
| 2011 | 2,660 | 3.9% |
| 2012 | 2,690 | 1.1% |
| 2013 | 2,800 | 4.1% |
| 2014 | 2,990 | 6.8% |
| 2015 | 3,100 | 3.7% |
| 2016 | 3,110 | 0.3% |
| 2017 | 3,230 | 3.9% |
| 2018 | 3,300 | 2.2% |
| 2019 | 3,300 | 0.0% |
| 2020 | 3,030 | -8.2% |
| 2021 | 3,000 | -1.0% |
Along with a small decrease in gold production from 2020 levels, there were no new major gold discoveries in 2021. Meanwhile, annual demand for the yellow metal increased by 10%, up from 3,651 tonnes to 4,020 tonnes.
The fall in production and long-term lack of gold discoveries point towards a possible imbalance in gold supply and demand. This calls for the introduction of new gold development projects that can fill the supply-demand gap in the future.
Sustaining Supply: Gold For the Future
Jurisdictions play an important role when looking for projects that could sustain gold production well into the future.
From political stability to trustworthy legal systems, the characteristics of a jurisdiction can make or break mining projects. Amid ongoing market uncertainty, political turmoil, and resource nationalism, projects in safe jurisdictions offer a better investment opportunity for investors and mining companies.
As of 2021, seven of the top 10 mining jurisdictions for investment were located in North America, according to the Fraser Institute. Here’s a look at the top five gold-focused development projects in the region, based on measured and indicated (M&I) gold resources:
| Project | M&I Gold Resource, million ounces* | Grade (grams/tonne) | Location |
|---|---|---|---|
| KSM | 88.4Moz | 0.51g/t | British Columbia 🇨🇦 |
| Donlin Gold** | 39.0Moz | 2.24g/t | Alaska 🇺🇸 |
| Livengood | 13.6Moz | 0.60g/t | Alaska 🇺🇸 |
| Côté Gold | 13.6Moz | 0.96g/t | Ontario 🇨🇦 |
| Blackwater | 11.7Moz | 0.61g/t | British Columbia 🇨🇦 |
*Inclusive of mineral reserves. **See cautionary statement regarding Donlin Gold’s mineral reserves and resources.
Located in Alaska, one of the world’s safest mining jurisdictions, Novagold’s Donlin Gold project has the highest average grade of gold among these major projects. For every tonne of ore, Donlin Gold offers 2.24 grams of gold, which is more than twice the global average grade of 1.03g/t.
Additionally, Donlin Gold is the second-largest gold-focused development project in the Americas, with over 39 million ounces of gold in M&I resources inclusive of reserves.
Novagold is focused on the Donlin Gold project in equal partnership with Barrick Gold. Click here to learn more now.
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