London loses way as home for gold miners

Bloomberg

Reports that AngloGold Ashanti Ltd is considering a London listing provide some festive cheer to a city that’s lost its way as a home for gold miners.
While Toronto, Johannesburg and Sydney have long hosted the biggest producers, London vies with New York as the world’s premier gold trading hub and its financiers have bankrolled the industry since the development of South Africa’s giant gold fields more than 130 years ago. When junior gold miners flocked to the city in the early 2000s, a renaissance seemed at hand.
That promise hasn’t been realised as companies from Petropavlovsk Plc and Acacia Mining Ltd to Centamin Plc struggled to reach their potential. Star performer Randgold Resources Ltd will exit next year after its acquisition by Barrick Gold Corp, capping a slump in the market value of London-listed gold and silver miners. That’s left fund managers struggling to find liquid gold stocks as the bullion price languishes.
“There has been a lot of value destruction in the sector,” said James Bell, an analyst at RBC Capital Markets in London. “Investors are saying: “not only do I have no conviction on where the gold price is going, but also these companies are fundamentally high risk.”
When Randgold delists, the combined market value of London’s gold and silver miners will drop to less than half the 30 billion pounds ($38 billion) of six years ago.
Just over a decade ago, Petropavlovsk was worth the same as Randgold and went on to peak at more than 2 billion pounds. Today its value has slumped to just 190 million pounds as the Russia-focussed producer is weighed down by crippling debt and over-ambitious expansion plans.
Barrick-controlled Acacia came to London amid hopes of emulating Randgold’s success in Africa, but was hobbled by operational failures and an increasingly bitter dispute with Tanzania’s government.
The company’s market value dropped by two-thirds since its 2010 listing and there is speculation the Randgold deal will prompt Barrick to buy back the shares in Acacia that it doesn’t already own.