New York beats London and Johannesburg in gold equities battle
The momentum has been building for years, but this week made it official: the epicentre of the gold mining industry now lies firmly in New York.
The announcement that top-five producer AngloGold Ashanti will move its primary listing to the New York Stock Exchange represents severing more than a century of ties with South Africa, three years after selling its last mine in the country.
But it also points to a wider reality for the gold mining market: if you’re looking to tap more investors and capital, there’s only one place to be.
New York’s status as a global hub for gold equities has expanded in recent years after a series of mega deals reshaped the industry, creating two North American behemoths that dominate the space — both of which trade in New York. The concentration of industry-specific exchange-traded funds have also added to the attraction.
“It’s where the largest pool of capital by far is,” AngloGold Chief Executive Officer Alberto Calderon said in an interview Friday. “It’s where the specialist investors who like gold are.”
For years, New York vied with London as the world’s premier gold-equity trading hub, while Toronto, Johannesburg and Sydney also put up a valiant fight. But the competition now seems all but over. (In AngloGold’s case, London, which was long touted as a potential listing venue, must instead settle for being home to the miner’s new headquarters.)
The importance of New York trading is already apparent for AngloGold. The company’s secondary listing there already accounts for about two-thirds of its trading volumes, providing a disproportionate amount of liquidity, given only about one-third of shares are held by US investors.
AngloGold’s move comes as gold itself edges toward a record, driving investor interest. The metal has risen amid banking sector turmoil, strong central-bank buying and increasing bets the Fed will start cutting interest rates later this year.
The US is also home to the world’s biggest gold mining ETFs, such as The VanEck Gold Miners ETF. As more investors pile into exchange-traded products as an easy exposure to the metal, a heavier weighting is a quick route to increase liquidity.
For a while, the London Stock Exchange — home to most of the world’s biggest diversified miners — looked poised to hold its own. London-listed Randgold Resources became a poster child for the industry and its record as the FTSE 100’s best-performing company drew others to list there in attempt to replicate the “Randgold premium.”
But London’s revival fizzled out. The companies that tried to replicate Randgold struggled with operational setbacks, while Randgold itself was so successful that it completed a de facto reverse takeover of Barrick, with CEO Mark Bristow taking over the enlarged company.
At the time, Bristow was particularly pleased that he secured the GOLD ticker for the company to trade on in New York, creating obvious brand appeal for bullion-hungry investors.
Today, Barrick’s volume in New York is roughly three times the number of shares changing hands in Toronto.
In 2019, US rival Newmont Corp. followed the Barrick-Randgold tie-up with its own transformational deal, buying Canada’s Goldcorp. Newmont — now the world’s biggest gold miner — appears about to get even bigger, as it pursues a $19.5 billion takeover of Newcrest Mining Ltd.
The series of mega deals, backed by US investors with a keen appetite for bullion and the companies that mine it, has left many of their one-time rivals looking increasingly irrelevant.
Newmont — even before its planned purchase of Newcrest — is worth $36.5 billion and Barrick $33.7 billion. AngloGold is valued by its investors at just $10.7 billion.
While much of the discrepancy is because the larger companies produce more gold at a lower cost, AngloGold also believes having more US shareholders will help close the valuation gap.
Currently, about 35% of AngloGold’s investors are US based, a number it expects to rise over time.
“For the relative size of our company, we are significantly underrepresented in that pool of capital,” said Calderon.