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RFC Ambrian says “time is right” for M&A activity in African gold industry

“Although M&A got itself a bad name as the result of over-enthusiastic prices being paid for assets at the top of the cycle, it remains a mechanism through which companies both build their businesses or transform their status,” the analysts said in the report

truck in a gold mine
“In any event, the Market is open,” analysts at RFC Ambrian concluded

The time is right for more merger and acquisition (M&A) activity in the African gold industry, according to analysts at RFC Ambrian.

"Although M&A got itself a bad name as the result of over-enthusiastic prices being paid for assets at the top of the cycle, it remains a mechanism through which companies both build their businesses or transform their status," the analysts said in a report on African gold M&A entitled ‘The Market is Open’.

Ambitious plans to grow businesses

They added: “We see this as being of particular significance in the current market conditions, where the lack of gold price volatility and the reduced ebb and flow of capital into the gold sector provides a high level of transparency on companies’ activities.”

RFC Ambrian sees the most potential for merger activity in the group of single African mine gold producers, with many of these companies having ambitious plans to grow their businesses.

The analysts said key companies among this group are: Centamin PLC (LON:CEE), Resolute Mining Ltd (LON:RSG), Asanko Gold (LON:AKG) and Teranga Gold (LON:TGZ)

Among the African-focused gold producers, RFC Ambrian considers Semafo inc. (TSE:SMF) and Avesoro Resources (LON:ASO)  the most likely to acquire African-based assets.  

On the assets potentially for sale, RFC Ambrian names Endeavour Mining's (TSX:EDV) Tabakoto mine in Mali, which has a high cost base and a short life.

“The company is reported to be undertaking a review process as a result of which it will make a final decision regarding the project’s future,” the analysts said.

Four projects with the potential to attract interest 

According to the analysts, the acquisition of development staged projects is a perennial of M&A activity, and they see four projects as having the potential to attract third party interest.

These projects are cardinal Resources’ Namdini Project in Ghana, Orezone Gold’s Bombore Project, West African Resources’ Sanbrado Project in Burkina Faso, and Orca Gold’s Block project in Sudan.

RFC Ambrian concluded that ‘Urge and Merge’ is a current theme of company strategy and this will be reflected in M&A activity over the coming years.

“In any event, the Market is open,” analysts at RFC Ambrian concluded.

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