Two Gold Deals Cleared This Week. Neither Involved Cash.

Cash or paper? Two gold deals cleared in the same week, at opposite ends of the mine life, and neither one involved cash.

NovaGold moved from 60% to 100% of Donlin Gold, buying out Paulson's 40% in an all-share transaction, redomiciling to Delaware, and listing on the NYSE.

Equinox Gold Corp. and Orla Mining Ltd won approval for their US$18.5bn all-share merger, creating Canada's second-largest producer behind Agnico Eagle.

One owns 32.8 million ounces of proven and probable reserves and has never poured a bar. The other pours roughly 1.2 million ounces a year.

Put both on the same measure. Donlin costs US$281 an ounce to build. Equinox and Orla mine an ounce at a blended US$1,810. The development number is a seventh of the production number, and it is the development number that cannot be raised.

Timing is the reason. Equinox pays its cost one ounce at a time, out of revenue, and at US$4,000 gold, it clears it comfortably. NovaGold has to find US$9.2bn in full before a single ounce is sold, from a balance sheet worth US$4.2bn.

Which is why the deal was never really about the 40%. Read the release: a new Delaware parent, an NYSE listing, and a line naming governmental agencies and sovereign wealth funds as the intended source of development capital.

You do not redomicile to raise money from the market you are already listed on. You do it to reach money that sits outside it.

Equinox is doing the opposite thing for the same reason. Scale is a route to capital that runs deeper into public markets rather than around them. Neither deal buys a lower cost.

The pattern underneath both is what struck me most. Across 62 gold deals announced so far this year with a disclosed value, cash accounts for four per cent. Twelve were all-cash, and every one was small. The largest ranks sixth by value at US$246m. Above that line, there is nothing but shares.

At a record gold price, with the widest producer margins in a decade, the sector is buying assets with equity rather than money.

Worth watching which end the market rewards once gold stops setting records.

Less searching. More strategising.™