(Adds link to graphic)
By James Regan and Denny Thomas
SYDNEY/HONG KONG, July 21 (Reuters) - A dramatic slide in
gold prices this week threatens to squash a run of mining
mergers and acquisitions just as momentum in the sector was
picking up.
Mining executives and fund managers warn predators will turn
more cautious before splashing out cash or approving capital
raisings, at least until bullion shows signs of stabilising.
The value of completed gold mining mergers and acquisitions
so far this year has reached $3.2 billion, compared with $4.4
billion for all of 2014, according to Reuters data.
Gold this week took its sharpest dive since September 2013,
landing at $1,088 per ounce, a five-year low.
That sent key indices measuring the health of gold mining
companies crashing in its wake.
The Australian .AXGD and Canadian .SPTTGD indices fell
11 percent each, while the Johannesburg Stock Exchange gold
index .JGLD.AX dropped 12 percent.
"There's still an appetite to grow through M&A (mergers and
acquisitions)" said Hedley Widdup, a fund manager at
Melbourne-based Lion Selection Group, which invests in small
mining companies and explorers.
"The issue now is shareholders and funds providers will be
looking at the gold price and wondering about valuation," Widdup
said.
John Tivey, a partner at law firm White & Case in Hong Kong,
said gold price volatility was a setback for deal-making as it
made it hard to agree on valuations.
Companies that were already committed to sales programmes in
a bid to reduce debt would have to lower their price
expectations, he added.
"In the face of a continued fall in the gold price the
market will get to a point where smaller gold miners have no
choice but to more aggressively look for merger opportunities or
strategic investors in order to survive," Tivey said.
CURRENCY SUPPORT
Jake Klein, executive chairman of Australia's Evolution
Mining EVN.AX , one of the most acquisitive gold miners this
year, wouldn't rule out more purchases as long as they can add
value.
For the most part, that points to mines and prospects in
commodity-based economies such as Australia, where gold's plunge
has been offset by a weaker currency that has boosted returns
for domestic miners.
While the U.S. dollar denominated gold price is down more
than 40 percent from its September 2011 peak, gold has only
fallen about 20 percent in Australian dollar terms.
Evolution in May raised A$172 million to help pay for its
$550 million acquisition of the Cowal gold mine in Australia
from Canada's Barrick Gold ABX.TO , receiving strong support
from existing institutional shareholders and new investors.
"Investor sentiment in gold is understandably very low and
investors have lost a lot of money," Klein said.
"Not withstanding that, the Australian gold sector is
undoubtedly a good place to be. Costs are coming down and with
the falling Aussie dollar supporting a higher A-dollar gold
price, the profitability wedge per ounce is widening."
Andrew Cole, chief executive of Oz Minerals OZL.AX said
his company has already passed over a few opportunities this
year, but was still on the lookout in both gold and copper.
For Oz Minerals, said Cole, "It's absolutely a global
search."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC: Falling Australian dollar supports miners' profits
http://link.reuters.com/wex25w
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Editing by Richard Pullin)