Here is an article from Deal Talk...FYI;
By Denny Thomas and James Regan
SYDNEY, June 25 (Reuters) - Australia's smaller gold miners are showingan urge to merge in an effort to bulk up and court investment fundsthat are being drawn to the sector due to the soaring bullion prices.
At least two sub-A$500 million mining deals have been tabledin the past few weeks and investment bankers and analysts are countingon more to come. The bankers, who had direct knowledge of somepotential deals, did not wish to be identified as the negotiations wereconfidential.
"There's movement afoot in the smaller end of town and arecognition that now is the time to act," said DJ Carmichael & Comining analyst James Wilson.
U.S. dollar-denominated gold has capitalised on uncertaintiescaused by the financial crisis, rising as much as 24 percent sinceJanuary. In Australian dollars, gold's ascent is even more impressive,leaping as much as 34 percent.
The jump in prices of the metal and strong growth prospects of the miners are inviting growing attention from investors.
A survey this month by accountants Deloitte showed a handful ofminnow-sized miners are gaining momentum on the back of theirprospects. It singled out Centamin Egypt whose capitalisation balloonedA$608.7 million, or 56.7 percent, in May.
The problem, however, is the vast majority of the 25 gold minersin Australia are small and have a market value of less than A$1billion, making it near impossible for most fund managers to invest inthem because of liquidity concerns.
'CONSTRAINT'
Companies want investment funds as shareholders as they tend to belong-term investors and their involvement boosts the profile of thebusiness.
"For large investors, there is a bit of a constraint in theAustralian market," said Steve Robinson, a fund manager with AlleronInvestment Management. "Size does become an issue."
Alleron manages about A$1 billion in Australian shares, includingLihir Gold Ltd, the second-biggest listed gold miner in the nation.
For institutions in Australia without mandates to invest in globalshares, Newcrest Mining Ltd and Lihir are the only routes to gainexposure to big gold stocks. Newcrest, the biggest listed gold firm,has a market value of about A$14 billion and Lihir A$7 billion.
Centamin and Sino Gold Mining Ltd -- each about one-tenth thesize of Newcrest -- are distant thirds. The rest of the stocks arevalued under A$1 billion, with an average capitalisation of aroundA$200 million.
There used to be more choices, including Normandy Mining,Gold Fields and Delta Gold, but these were acquired earlier this decadeby international companies with overseas stock listings. Companies eager to fill that void want to gobble up smaller minesto create size. In April, Avoca Resources Ltd launched an unsolicitedscrip bid for Dioro Exploration NL in hopes of immediately takingannual gold output to a quarter-million ounces from 180,000. "The institutions can buy what they want but if there was a largerAustralian gold company that would bridge the gap, then they would be alot more attracted to that," Rohan Williams, CEO of Avoca Resources,told Reuters. "If we succeed, we would be expecting a re-rating," Williams said. Other deals have followed. Catalpa Resources this week agreed to amerger with smaller peer Lion Selection's gold assets. The combination, which would create a gold producer with output ofabout 130,000 ounces a year, sent the shares in both companies sharplyhigher and immediately achieved one objective of the union: arevaluation of Lion Selection's gold assets. But size alone may not cut it. "Putting mines together to create a bigger company does notnecessarily solve all problems," said Neil Boyd-Clark, a fund managerat Fortis Investment Partners. "What you want to do is put assets together that can do a betterjob than they could separately," said Boyd-Clark, who helps manage A$4billion in Australian shares, but doesn't own gold mining stocks.
Have A Great Evening Folks;
Bag Of Gold