This week, it was reported that the boards of both Regis Resources (ASX:RRL) and Vault Minerals (ASX:VAU) unanimously recommended the $10.7bn merger, which would create the third-largest gold miner on the ASX. Under the deal structure, Regis will hold the controlling 51% stake in the merged entity, with Vault shareholders taking the remaining 49% - making it more of a Regis takeover.
Regis (ASX:RRL) fell 3.25% this week, while Vault (ASX:VAU) rose 4.44% — exactly what you’d expect when a merger is announced, with the acquirer selling off and the target getting a boost.
Both miners operate in WA’s Goldfields region, the remote mining heartland of WA that produces the bulk of Australia’s gold. Regis is the larger of the two, operating multiple mines north of Kalgoorlie, and holds a 30% stake in one of Australia’s largest gold operations with global mining giant AngloGold Ashanti. Vault is more concentrated, running two mines in the same region along with a site in Canada that is due to start producing soon. Together, they will sit on a mineral resources base of 20.5 million ounces and produce over 700,000 ounces annually.
The price of gold has rocketed in the past couple of years, going from $US2100 per ounce in early 2024 to a record high of nearly $US5600, with today’s price sitting around $US4700. For Australian gold producers, it only costs them $2,000-$3,000 to extract an ounce of gold, so with gold prices soaring in recent years, the margins have followed.
Together the two companies will enter the market with nearly $2bn in cash, and with management already hinting at more acquisitions, operational expansion or returns to shareholders. Genesis Minerals, the $7bn Kerry Stokes-backed rival, is the name most analysts are circling as the next target — and even Regis CEO Jim Beyer hasn’t ruled it out.
A gold deal like this doesn’t come out of nowhere. The ASX has been in the middle of a M&A gold rush in the past two years driven by rising gold prices. What’s happening in gold is a preview of what tends to follow in other commodities when prices surge. It follows a similar process: margins expand, balance sheets grow stronger, and then a merger or acquisition. If copper and uranium prices hold at current levels, don’t be surprised if we see deal activity there soon.
