Gammon latest in gold merger wave

Toronto-based Gammon Gold announced Friday it will merge with Capital Gold Corporation of New York in a cash and share deal worth $288 million US.

Both companies produce and explore for gold in Mexico. The boards of both firms have unanimously voted to support the transaction.

Each common share of Capital Gold will be exchanged for 0.52 common shares of Gammon Gold and a cash payment in the amount of $0.79 US per share. The transaction is expected to close in late 2010.

The announcement came as gold rose still higher Friday, gaining $9.10 to trade at $1,318.70 US an ounce in late morning trading in New York.

The deal is the latest in a string of dozens of mergers and takeovers in the Canadian gold industry this year.

Deals this year include Kinross Gold and Red Back Mining in a merger worth $7.1 billion US, and Goldcorp's $3.4-billion takeover of Andean Resources. 

China-based Jinchuan mining group has made a friendly offer for Continental Minerals worth $432-million Cdn and Anatolia Minerals Development has said it would acquire Australia's Avoca Resources for about $1 billion.

As well, privately owned YS Mining has said it plans to make a $15.6 million Cdn all-cash bid for Tagish Lake Gold, Fronteer Gold has said it has agreed to acquire AuEx Ventures in an arrangement valued at $280.8 million, and Rolling Rock and Mega have announced a merger worth $10.1 million.

Gold firms account for 40% of takeovers in mining

A recent report on mining merger activity by PricewaterhouseCoopers found gold companies have accounted for nearly 40 per cent of all acquisitions in the global mining sector over the last 12 months.

PwC is predicting that 2010 could meet or even surpass the previous record for merger and acquisition activity in the mining sector, set in 2007, with the gold industry leading the way.

And this activity will only increase as Chinese companies become more interested in the yellow metal. So far, resource companies in the world's fastest-growing market have mostly focused on acquisitions of copper and other base metals to meet a growing demand for consumer goods.

But gold is certain to attract more interest as its increasing value solidifies its status as a safe-haven investment and an alternative to currency, said John Nyholt, national leader of transaction services at PwC in a recent interview with The Canadian Press.

"Mining companies are certainly anticipating that at some point China will starting turning its attention to gold, and that'll come in two ways: investing in the commodity itself, and actually buying gold companies."