Australia’s gold miners build M&A war chests

Australia’s top gold producers have stockpiled billions of dollars in cash and bullion as record-high gold prices fuelled by geopolitical turmoil and central bank demand swell balance sheets across the industry.

Several Australian-listed gold miners ended June with cash and bullion reserves well above A$500 million (US$335 million), with Northern Star Resources (ASX: NST) alone holding A$1.9 billion, according to Surbiton Associates, a mining consultancy that tracks sector performance. The gains come as gold prices in touched near-record levels of A$5,100 per oz. this year.

“When you look at historical gold prices, gold was so extraordinarily cheap compared with current prices,” Surbiton director Sandra Close, who holds a doctorate and nearly 60 years of industry experience, said in an Aug. 3 news release. “Had it been possible to predict the future, we could all now have become very rich indeed.”

Gold’s rise — driven by war in Ukraine and the Middle East, inflation hedging, and heightened central bank and investor demand — has pushed the Australian-dollar gold price up nearly 165-fold since the U.S. abandoned the gold standard in August 1971, Surbiton noted. The U.S. dollar price has climbed about 95-fold in that time (the Aus dollar has lost about 42% of its value vs the U.S. dollar since then).

Substantial reserves

The firm listed eight Australian gold companies with substantial reserve positions as of June 30, including Ramelius Resources (ASX: RMS) with A$810 million in cash and bullion, Evolution Mining (ASX: EVN) with A$760 million in cash, and Vault Minerals (ASX: VAU) with A$686 million. Other companies named include Regis Resources (ASX: RRL), Westgold Resources (ASX: WGX), Capricorn Metals (ASX: CMM), and Gold Road Resources (ASX: GOR).

While these reserves suggest financial strength, Close said they raise strategic questions for boards and shareholders.

“Perhaps they could be used for further acquisitions although prices now paid to obtain such new assets are very high,” she said. “The concern is that the larger the cash reserves become, the more the company may become a tempting takeover target.”

She added: “Of course there is another rather obvious solution. I am sure that shareholders would love to see higher dividends.”

The full report coincided with the start of the Diggers & Dealers Mining Forum in Kalgoorlie, Western Australia, where gold remains the top commodity of focus amid global uncertainty and sector consolidation.