Newcrest paves way for gold deals

These include Thailand-focused Kingsgate Consolidated, Perseus Mining, with ground in West Africa, and Andean Resources, exploring in South America.

Takeovers have denuded the top end of the Australian gold sector, leaving only a few vehicles with which institutions can ride the gold bull market outside of Newcrest, according to Warwick Grigor, who heads BGF Capital Group.

Sino Gold fell into the hands of Eldorado Gold, Kinross Gold is offering about $7bn for Red Back Mining Inc and Lihir, now Newcrest, bought Africa-focused Equigold.

"Perseus will get taken over at some point, but management is raising the bar through a very aggressive drilling program designed to disclose riches in the ground sooner rather than later, ensuring that a bidder pays a maximum price," Grigor said.

Most big miners are basing the economic viability of their reserves on a minimum gold price of $800 an ounce - $750 in the case of Newcrest - meaning they could comfortably generate sufficient cash flow to spend on M&A given gold is trading near its record $1,264.90 an ounce.

"I certainly see a sector that over time will be generating a fair bit of cash," said Newcrest Managing Director Ian Smith.

"If that is the case, you're going to see a sector which will be ripe with cash -- that will spur along M&A activity going forward," Smith said. For its part, Newcrest would be comfortable with gearing between 15 and 25 percent, but would be willing to step that up to pursue acquisitions.

Newcrest said assuming the final split of cash and shares in the payment to Lihir shareholders comes out close to around $450m in cash, it would have no net debt.

"If something came along which was a compelling acquisition or some other reason to go to a higher gearing point over a short period, then we'd certainly pursuit it," Smith said.

Those comments could signal the first warning shot that Newcrest is again on the prowl.

With the Lihir buyout, Newcrest will have 77 million ounces of gold reserves and 136 ounces of resources, making it a top five global gold miner on each measure.

Kingsgate, which mined 132,628 ounces of gold last year from Thailand's only gold mine, Chatree, and reported a 125 percent leap in profit to A$73 million, could turn predator or prey.

Kingsgate's dividend yield rate of about 3.5 percent is among the best in the gold sector and the required 51 percent sell down of Chatree required under Thai law means Kingsgate is hunting for new ground.

Overseas business

Kingsgate chief executive Gavin Thomas, who found the Lihir gold mine in Papua New Guinea, is keen to keep Kingsgate focused on Southeast Asia and the South West Pacific.

Deposits in Australia hold little appeal, with greater focus put on Australian-listed companies active overseas.

The last major find in Australia - the world's second biggest gold producer after China - was made five years ago at the Tropicana lode. It is majority-owned by South Africa's Anglogold Ashanti, which has yet to give board approval for its development.

"Ghana has developed 15 mines in the past five years and I can see 15 more in the next five years," said Mark Calderwood, managing director of Perseus Mining, who predicts M&As in the sector will only intensify.

He describes West Africa as "elephant country" for gold miners looking to expand.

"In Australia, it's pretty hard to find the low-hanging fruit," Calderwood said.

Newcrest's Smith agrees: "West Africa is a play within the gold industry. It's one of those areas that most people are pursuing at the moment."

Ghana is West Africa's largest gold producer and the African continent's second-largest producer after South Africa. It yielded 2.8 million ounces in 2009, government data shows.

Underlining international interest in the region is the decision by Kinross' offer to take full control of Red Back, which owns mines in Mauritania and Ghana.