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Precious Metals Industry – From Mining to Retail – Consolidated In Recent Years
[The following post is by TDV Contributor, Justin O'Connell]
Amid depressed prices, there has been quite a bit of consolidation in the precious metals industry, affecting miners and even local coin shops.
A multi-year bull run ended in 2014, after $30 billion in debt had been taken on by gold miners. The miners which minimized their borrowing are now in a position to buy mines from rivals with weaker balance sheets, according to executives at the Investing In African Mining Indaba Conference in South Africa earlier this month, the biggest gathering of the sorts on the entire African continent.
$2.7 billion in deals have been announced or completed in 2015, including February's $1.1 billion offer for Rio Alto Mining Ltd. by Tahoe Resources Inc. In 2014 there were $10.5 billion in deals.
“Gold is one of the brighter spots out there in the commodities space today,” said Rajat Kohli, who heads metals and mining at Standard Bank Group Ltd., Africa’s largest lender. “I would expect corporate activity to be reasonably pronounced in gold, not just in Africa but globally. We will see a few transactions, definitely.”
Randgold Resources Ltd., the best performing gold-mining company in the past decade, has been “flat out” overrun with offers to buy assets, Chief Executive Officer Mark Bristow said in an interview.
“People are a bit more confident to move from the sidelines into a bidding process,” Srinivasan Venkatakrishnan, CEO of AngloGold Ashanti Ltd., told Bloomberg. The world’s third-largest gold miner is looking to sell assets or form joint ventures to reduce debt, according to him.
“As the clock ticks on with this gold environment, balance sheets, access to capital, those all sometimes become catalysts for M&A,” Kinross Gold Corp. CEO Paul Rollinson said Dec. 10. “Our strategy has positioned us well to perhaps be opportunistic in that regard.”
Tahoe Resources offered $1.1 billion in cash-and-stock in February for Rio Alto, the largest gold deal in almost 10 months. Acacia Mining Plc wants to do a massive deal sometime this year. B2Gold Corp recently paid $570 million for Papillon Resources Ltd. to gain control of a project in Mali.
“A lot of people in our sector are a little scared to do deals, to step up and do something that may be considered a risk,” he said. While some companies “are licking their wounds, we’re out doing acquisitions and growing the company very aggressively.”
The public markets are also interested in gold, as the 14-member Bloomberg Intelligence Global Senior Gold index is up 22 percent already this year, outperforming the 42-member MSCI World Metals and Mining index, which is down .03 percent. Gold companies have raised $852 million through public offerings this year, including more than $900 million last month from Canadian producers Romarco Minerals Inc., Detour Gold Corp., Osisko Gold Royalties Ltd. and Yamana.
It hasn't been merely the mining industry where consolidation has taken place. The entire ecosystem around the precious metals market has been somewhat transformed.
In 2012 there was a merger between NTR Metals and Ohio Precious Metals. NTR is a global company refining over 30 million pounds of metal each year. They are involved in commercial refining, industrial recycling and refining, precious metals market making, and bullion minting.
Ohio Precious Metals was founded more than 35 years ago and refine gold, silver, platinum and palladium. OPM receives their materials from jewelry, pawn, coin, photographic, electronic, secondary refining/collecting and banking industries.
The NTR and OPM merger was merely symptomatic. The merger of these two companies created Elemetal LLC and Elemetal has purchased multiple companies in the last year. NTR recently purchased Provident Metals:
Provident Metals™, a leading online provider of bullion, currency and numismatic coins, announced that it has partnered with global precious metals company Elemetal, LLC.
Provident Metals offers a full line of sovereign and private bullion, currency and numismatic coins. Based in Dallas, Provident meets the bullion needs of precious metals collectors and investors across the United States and internationally.
Elemetal™ is a global precious metals company based in Dallas. Its principal holdings include OPM Metals™, NTR Metals®, Echo Environmental™ and DGSE Companies, Inc. Elemetal's operations focus on precious metal recovery, refining, and minting.
Provident Metals President Joseph Merrick stated that this alliance will create unprecedented new opportunities for bullion customers and both companies. “Provident will significantly sharpen its competitive edge with industry-leading prices, increased product selection and faster shipping.”
Elemetal Chairman Alan Stockmeister added that, “This partnership allows OPM Metals an unparalleled opportunity to highlight its brand as the largest American-owned, COMEX deliverable gold and silver refiner and minter.”
Additional information about Provident Metals and its expansive line of products is available at ProvidentMetals.com.
Another major acquisition by Elemetal was the purchase of Dallas Gold Silver Exchange or DGSE, a publicly traded company. Elemetal, LLC, a global precious metals conglomerate based in Dallas, Texas, adds over 4 million shares of common stock of DGSE Companies, Inc. to its holdings. This merger came about due to intrigue and difficulty, for sure. More is known about this buyout than the Provident acquisition.
DALLAS, Jan. 7, 2013 /PRNewswire/ — On January 2, 2013, NTR Metals, LLC contributed 4,393,142 shares common stockof DGSE Companies, Inc. to Elemetal, LLC in exchange for ownership units of Elemetal. NTR also agreed to contribute its option to buy 5 million additional shares of DGSE.
Elemetal's other principal holdings include OPM Metals™, NTR Metals®, and Echo Environmental™.
OPM Metals is the largest American refiner of good delivery gold and silver, and has earned SCS Global Services certifications for Certified Responsible Source Gold and Silver, and 100% Recycled Gold and Silver Content.
NTR Metals operates a worldwide network of over 70 precious metals processing locations in 12 countries. It serves more than 25,000 companies, ranging from small, independent businesses to large corporations.
Echo Environmental is a large-scale processor of hazardous and non-hazardous precious metal-bearing industrial byproducts. In 2012, Echo Environmental processed over 30 million pounds of these byproducts.
“We are pleased to expand our presence in the precious metals industry with the acquisition of a significant stake in DGSE,” said Alan Stockmeister, Elemetal's Chairman of the Board. “DGSE's retail buying and selling capabilities augment our integration strategy in the precious-metals industry's value chain and increase our capacity to serve the varied needs of our clients.”
SOURCE Elemetal, LLC
While the precious metals market remains diverse, there clearly is documented tumult within the ecosystem.
I suspect the reason for the megers and acquisitions rests with the price action. At the same time, however, as the consolidation takes place, new technology is lowering the overhead to enter into the precious metals market. Companies are now offering the options for individuals to, with a one-time upfront payment, run their own precious metals e-commerce company on their own website. In many cases, these business owners won't even need to worry about shipping/handling.
As we can see, numerous changes are coming over the precious metals market, from mining to retail operations. It is an exciting time to be well-positioned around the precious metals, but when you are overleveraged in the industry, surviving periods of soft prices could be daunting. That's why arbitraging new technologies to revolutionize old services is so important.
[Editor's Note: The Dollar Vigilante Newsletter stays up-to-date with the precious metals industry, and, alongside the analysis of Ed Bugos, we offer ways in which you can enter into the industry with minimal effort and prosper from the secular bull market in gold and silver. Join us today to learn more.]
Questions or comments? Join us at The TDV Blog.
The Dollar Vigilante is a free-market financial newsletter focused on covering all aspects of the ongoing financial collapse. The newsletter has news, information and analysis on investments for safety and for profit during the collapse including investments in gold, silver, energy and agriculture commodities and publicly traded stocks. As well, the newsletter covers other aspects including expatriation, both financially and physically and news and info on health, safety and other ways to survive the coming collapse of the US Dollar safely and comfortably. You can sign up to receive our FREE monthly newsletter, our Basic Newsletter ($15/month) or our Full Newsletter ($25/month) with specific stock recommendations and updates at our Subscriptions page on our website at DollarVigilante.com.
Source: http://www.dollarvigilante.com/blog/2015/2/27/precious-metals-industry-from-mining-to-retail-consolidated-.html#6774
