According to Douglas Silver, CEO of Balfour Holdings, the gold space is currently overcrowded with companies, but he believes that consolidation is unlikely to happen during the current market bottom. Silver suggests that mergers and acquisitions are more likely to occur at the top of the market cycle when companies are able to raise the necessary funds for such transactions. He also predicts that there will be a significant reduction in the number of companies in the gold sector due to a lack of capital flowing into the exploration sector. Silver is optimistic about political support for U.S. mining, noting that there has been substantial government funding for mining companies and research on critical minerals. He also mentions that automakers like General Motors, Ford, Tesla, and Stellantis are directly investing in mining companies to secure the electrification metals they need.
In an interview with Kitco at the Precious Metals Summit 2023, Silver expressed his concerns about the excessive number of companies in the gold sector. He expects a significant reduction in the number of companies through natural attrition rather than mergers and acquisitions. Silver explained that the lack of capital coming into the exploration sector will lead to companies “dying on the vine.” He believes that the current market bottom is not conducive to consolidation, as companies are struggling to finance their own operations, let alone acquisitions. However, he anticipates that mergers and acquisitions will take place at the top of the market cycle when companies are financially capable.
Despite his concerns about the overcrowding in the gold sector, Silver remains positive about political support for U.S. mining. He highlighted the significant government funding that has been allocated to mining companies and universities for critical minerals research. This includes grants given to Albemarle and Lithium Americas’ Thacker Pass project, despite local opposition. Silver sees this as a positive shift for the U.S. mining industry. Additionally, he mentioned that automakers, such as GM, Ford, Tesla, and Stellantis, are directly investing in mining companies to ensure a steady supply of metals needed for electric vehicle production. This shows the growing importance of mining in the electrification industry.