(Kitco News) -With the downturn in the mining industry having seen mergers and acquisitions all but disappear in 2013, there could be an uptick on deck.
John Turner, partner and head of Global Mining Group with international business law firm Fasken Martineau, told Kitco News that he’s beginning to see signs of M&A action picking up.
“I can sense from my perspective as a lawyer, that transactions take a while to hit the market, but I can tell you that behind the scenes certainly a lot more people (are) talking about M&A deals — some of it distressed but some of it more positively charged M&A and people even talking about IPOs again,” Turner said.
“Some of my clients in the junior industry are getting calls from institutions, asking for updates and seeing what’s going on, so all those are relatively positive signals,” he added. “I don’t think anybody’s saying its going gangbusters yet but I think it’s starting to look better than a few months ago.”
It’s no secret that miners have had a rough year. Junior-mining companies are the greatest risk among producers, with analysts and experts alike dubbing most juniors in “survival mode” due to a lack of cash.
What doesn’t help matters are rumblings of proxy fights within the industry.
“What I am seeing a little more of is people talking about proxy fights,” Turner said. “In some cases very significant shareholders are dissatisfied with the way things are going, with the way some juniors have been run, and, I guess some ideas into how to salvage projects, or combine them with others.
“So, a lot of the distressed situations seem to be led at the moment by major shareholders, as opposed to management – and that’s my sense,” Turner said. “You’re starting to see a few small financings but if it continues to go the way it’s currently going, we’re going to see more distressed M&A and proxy fights where people are maybe putting proposals to shareholders saying ‘we can do a better job, or we can combine the company with something else that we have.’”
Turner pointed out Alamos Gold Inc. (TSX, NYSE: AGI), which acquired both Esperanza Resources and Orsa Ventures in mid-2013, as examples of strong M&A in the industry.
Which raises the question: who’s better equipped to pull the trigger on M&A deals at the moment — mid-tier producers or major producers?
“My sense from the majors is that they’re continuing to be cautious, and if anything, in selling mode, which may either be selling projects that they don’t view as critical or selling stakes in bigger projects,” Turner said. “Most intermediates have good-sized corporate development teams now, and they’ve been kind of held back for the last year or two.
“I’m getting the sense that they’re looking a little more seriously and boards are more open to buying, even more than a few months ago,” he added. “We’ll see where it goes but it definitely feels like more people are talking.”
As for the mining industry outlook, Turner sees a rocky ride, but a brighter future.
“My sense is that it’s going to be uneven and volatile,” Turner said. “It’s not going to be the sort of early part of the cycle where the tide raised all ships. I think it’s going to be selective among metals and along companies but I do see signs that better times are ahead.”
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By Alex Létourneau of Kitco News aletourneau@kitco.com
https://www.forbes.com/sites/kitconews/2013/10/16/mining-ma-starting-to-show-signs-of-life-head-of-global-mining-group-fasken-martineau/