Small Australia gold miners eye mergers to woo funds

"The institutions can buy what they want but if there was a larger Australian gold company that would bridge the gap, then they would be a lot more attracted to that," Rohan Williams, CEO of Avoca Resources, told Reuters.

"If we succeed, we would be expecting a re-rating," Williams said.

Other deals have followed. Catalpa Resources (CAH.AX) this week agreed to a merger with smaller peer Lion Selection's (LST.AX) gold assets.

The combination, which would create a gold producer with output of about 130,000 ounces a year, sent the shares in both companies sharply higher and immediately achieved one objective of the union: a revaluation of Lion Selection's gold assets.

But size alone may not cut it.

"Putting mines together to create a bigger company does not necessarily solve all problems," said Neil Boyd-Clark, a fund manager at Fortis Investment Partners.

"What you want to do is put assets together that can do a better job than they could separately," said Boyd-Clark, who helps manage A$4 billion in Australian shares, but doesn't own gold mining stocks.

($1=A$1.25)

(Editing by Muralikumar Anantharaman)