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<p><strong>M&A in Gold: Reining in Costs and the Sustainability of Super Majors</strong></p><br/>

<p><strong>Reining in Costs</strong></p><br/>

<p>JOE FOSTER: There is a big move towards conserving costs, exercising greater capital discipline across the industry, providing better returns to shareholders, and using better profitability measures across the industry. This mentality has entered the M&A scene as well. In the past we typically saw heated takeover battles and companies wound up paying too much for their acquisition targets. So far in this cycle we've seen a few mergers this year but we haven't seen the heated battles of the past. When we see a takeover attempt there may be a counteroffer and at that point its game over. We're not seeing companies bid up the value of companies and pay exorbitant prices for takeover targets. That’s another example of the capital discipline that we're starting to see in the sector. The Osisko takeover is a situation where again Goldcorp came in as a hostile. There was a counterbid between Agnico and Yamana, and Goldcorp stepped away and said, “We're not going to pay any more. This is getting too rich and we have no intention to destroy value. We'll walk away and we'll look for something else.” There was another situation where a couple of juniors were merging. Rio Alto attempted to take over Sulliden; these were two junior heap leach producers in Peru. Sulliden was owned in part by Agnico and they were a purported takeover target for Agnico. Many people thought that Agnico might come in and try to take the company but Agnico backed away. They sold their stake to Rio Alto and were not willing to get into a bidding war and enter a situation where they might pay too much for an acquisition target. Again capital discipline on the M&A front is something that we're starting to see in the sector.</p><br/>

<p><strong>Super Majors</strong></p><br/>

<p>FOSTER: In our opinion some of these gold companies have gotten too big through M&A activity for their own good. Companies that we call the "super majors," such as Barrick, Newmont, and AngloGold, went through a period of conglomeration, when large companies were merged together to create what we call "super majors." It's very hard to sustain the super major model. When you're producing 6 or 7 million ounces a year, it's very hard to replace that production and very hard for these companies to create value, in our opinion.  We haven't seen much on the mega-merger front in recent times because a lot of that activity has already occurred; these companies are already at a very large size. In fact, there was recent news about changes in top management at Barrick. Barrick is the largest gold company in the world and we think that they realize that this mega gold company model might not be the best way to run a gold company.  We could see changes at Barrick that reflect what we're talking about -- the fact that some of these companies have gotten too big for their own good.</p><br/>


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<p><strong>IMPORTANT DISCLOSURE</strong></p><br/>

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