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Posts Tagged ‘Barrick’

Minesourcing: How could crowdsourcing be used in mining?

October 12, 2010 Comments off

Crowdsourcing is a trend in many consumer goods companies. The wisdom of the crowds is tapped by asking the general public to solve a business problem, design a logo, design new products, etc.. The Internet helps tremendously in structuring these requests and reaching a large public.

Crowdsourcing has also been applied in the normally conservative mining industry. Two examples have made it to the standard list of ‘minesourcing’ examples:

  • Goldcorp of Canada was facing declining production in 1999 and was running out of reserves. The company decided to put geological survey data online and offered a total of $575k in prizes to the persons who could identify likely areas for exploration. The contest triggered an enormous response from students, consultant, prospectors and a range of other people. Goldcorp says the contest produced 110 targets that yielded $3bln in gold. Furthermore, the company hired some of the people that came up with the most innovative solutions.
  • In 2007 Barrick Gold started the “Unlock the Value“-program. It challenged the scientific community to come up with an economically viable method to significantly increase silver recovery from the type of ore found at Veladero mine in Argentina. $10mln was promised to the scientists that would come up with a viable method and furthermore the company promised to pay $25k to the teams that made it to the concept testing phase. The company entered this phase in November 2008, testing 9 promising concepts.

If these two companies manage to create value by crowdsourcing operational and scientific challenges, probably more mining companies could do the same. Innovation in the industry could be accelerated if a succesful way is found to apply ‘minesourcing’. Why don’t we see more of these challenges? What is holding the companies back? Would it help to have an independent mediating platform between industry and scientists?

©2010 | Wilfred Visser | thebusinessofmining.com

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Eldorado Withdraws Bid for Andean

September 8, 2010 Comments off

“Eldorado Gold Corp. Tuesday withdrew its bid for Andean Resources Ltd., saying it wouldn’t top Goldcorp Inc.’s offer of 3.6 billion Canadian dollars (US$3.48 billion), which Andean accepted last week. Eldorado’s decision dashed hopes among some investors who were looking for a sweetened offer for Andean.

After Vancouver-based Eldorado pulled its bid, shares of Andean Resources, based in Sandy, Utah, declined Tuesday. Andean shares fell 8.5% to close at C$6.39 on the Toronto Stock Exchange. Andean is listed in Toronto and Australia. Eldorado shares rose 1.5% to C$20.18.

Andean shares had surged Friday to C$6.98, above the prices offered by Goldcorp and Eldorado, both based in Vancouver, in anticipation of a possible bidding war. Both suitors were lured by Andean Resources’ promising Cerro Negro gold mine in Argentina, which Andean said in July could produce as much as 285,000 ounces of gold a year at low cost, starting in 2012, with the potential for exploration to nearly double that output.”

Source: Wall Street Journal, September 7, 2010

Observations:

  • Eldorado was the first to make a bid for Andean. However, the Goldcorp placed a slightly higher bid which was recommended by Andean’s board after the same board rejected Eldorado’s offer.
  • The deal between Goldcorp and Andean has not yet been closed. In case a better bid is done by another player the board will evaluate the fit between companies and the height of the bid to make a recommendation to shareholders.

Implications:

  • Although Eldorado’s withdrawal is not good news for the Andean shareholders who hoped for a higher bid, it is good news for investors in gold. Goldcorp has the financial resources to quickly develop the Cerro Negro deposit, which will increase supply. However, the acquisition makes Goldcorp the second largest gold miner (after Barrick), increasing consolidation in the industry and moving towards a more oligopolistic structure, which will result in higher prices. Therefore, gold futures rose to $1257/ounce.
  • A higher cash offer than Goldcorp’s offer is unlikely. In case another company bids for Andean, the bid is likely to be part cash, part share-based or all shares.

©2010 | Wilfred Visser | thebusinessofmining.com

Newcrest expects $8bn Lihir deal

June 9, 2010 Comments off

“Newcrest Mining said on Tuesday it has finished due diligence on rival Lihir gold and expects to complete the $8.4 billion deal by September. It added that Lihir should now stop any discussions with third parties.

At least four of the world’s biggest gold producers have looked at the books of Lihir but Newcrest was seen as the only bidder, people familiar with the situation said on Monday.”

Source: Reuters, June 8 2010

Observations:

  • Lihir Gold has operations in Papua New Guinea, West Africa and Australia. In 2009 LGL produced 1.1 million ounces of gold.
  • The $8bn takeover would be the largest acquisition in the mining industry this year.
  • AngloGold Ashanti, Barrick Gold, Newcrest and Newmont mining are all said to have done due diligence on Lihir.
  • Lihir’s shares jumped over 30% early april after the company rejected an acquisition proposal by Newcrest valuing the company at AU$9.2 billion, 6.4% below the new offer.

Implications:

  • Compared to other metals the gold market is still rather fragmented. It is likely that further consolidation will take place in the industry.
  • The current high gold prices do create favourable conditions for acquisitions of companies with high current production, as investments can be paid back quickly. Still, Newcrest will be paying a large premium, as it is willing to pay the highest price of all the gold producers.

©2010 – thebusinessofmining.com