US company Newmont increased its February offer to buy all the shares of Australian rival Newcrest from USD 17 billion to USD 19.5 billion. Gold prices continue to hover above US$2,000 an ounce, near record highs, amid concerns about the global economic outlook.

This potential acquisition shows that producers are trying to make deals to strengthen their gold reserves, reduce costs and increase returns to shareholders. For example, in 2019, Newmont bought Canadian gold producer Goldcorp Inc. in a deal worth US$10 billion. In the same year, Newmont and rival Barrick Gold Corp. formed a joint venture in Nevada to cut costs after an earlier offer by Barrick to buy Newmont was rejected.

Gold miners have found it difficult for several years to find reserves in low-risk countries because many mines are running out of gold that is readily available and exploration campaigns are revealing few large deposits. Of the 341 large deposits discovered between 1990 and 2021, only 28 have been found in the last decade and they contained only 6% of the gold discovered since 1990. Gold producers are also facing higher costs due to wage increases and skyrocketing energy prices.

If the deal goes through, Newmont's gold production would nearly double that of its closest competitor, Barrick Gold Corp. The merger is expected to be the third-largest deal ever involving an Australian company, and also the third-largest globally by 2023, according to Refinitiv and Reuters calculations.