RE: Joe It has nothing to do with JoeyNational Post article
, Coro Mining Corp is also up 16 % because of the article.
The mining M&A frenzy is officially on, and the only question for investors seems to be which deal comes next.
Forthe last several months, merger and acquisition activity in theCanadian mining sector has been red-hot, with several large- andmedium-sized transactions coming together. But nothing predicted theflood of activity we’ve seen in the last week.
In athree-day period, three significant deals were unveiled, two of whichare enormous: HudBay Minerals Inc.’s takeover of Norsemont Mining Inc.($520-million), Cliffs Natural Resources Inc.’s acquisition ofConsolidated Thompson Iron Mines Ltd. ($4.9-billion), and the merger ofequals between Inmet Mining Corp. and Lundin Mining Corp. ($9-billion).
Whileeach of those transactions has a unique rationale, a lot of thedynamics driving them are the same: strong metal prices, a scarcity ofhigh-quality projects, and a need to bulk up to increase scale andliquidity.
M&A tends to beget more M&A, and withthose factors firmly in place, experts predict much more of it in theweeks and months ahead.
“You’re getting down to slim pickings, but I think it will continue,” said George Topping, an analyst at Stifel Nicolaus.
“Theproblem still hasn’t gone away of large companies with very strongbalance sheets and lots of technical people, but a lack of decentprojects to develop.”
He added that cost inflation hasreturned to the industry “with a vengeance,” forcing companies to bulkup if they hope to build larger projects. Inmet’s US$4.3-billion CobrePanama project is a prime example of that.
According toinvestment bankers, there is still a big backlog of deals in thepipeline, many of which are in the $500-million to $2-billion range.But as the Inmet-Lundin merger shows, almost everything is underconsideration right now.
There is a particularfocus on M&A in copper, which is no surprise as the metal trades atnear-record levels of around US$4.40 an ounce. Both HudBay-Norsemontand Inmet-Lundin are copper-focused transactions.
Expertssaid that junior companies like Norsemont with large copper resourcesare among the most attractive targets. Even after years ofconsolidation, there are still a good number of them left. The groupincludes Copper Mountain Mining Corp., Coro Mining Corp., Peregrine Metals Ltd., Far West Mining Ltd., Hana Mining Ltd., and Western Copper Corp.
Ifcompanies like these are not taken over by bigger players, experts saythere is a good chance that they could merge with each other toincrease liquidity and get some trading multiple expansion.
Theother hot sector for M&A has been gold. In the last year, themajors completed a couple of very large deals: Kinross Gold Corp.’smassive US$7-billion takeover of Red Back Mining Inc., and GoldcorpInc.’s $3.6-billion takeover of Andean Resources Ltd. But there werealso many substantial deals in the small- and mid-tier space.
CharlesOliver, co-manager of the gold and precious minerals fund at SprottAsset Management, expects that most of the action in gold this yearwill be between those smaller companies, with the seniors stayingrelatively quiet.
“The reason is that the big-cap nameshave lagged in terms of price performance,” he said. “The mid-caps havegotten expensive, relatively speaking, to what they would have been afew years ago. And because of that, some of the big-cap names may bereluctant to pay up on a relative basis.”
M&A activityin coal and iron ore (the bulk commodities) has also been hot in Canadalately. But following the takeovers of Consolidated Thompson, WesternCoal Corp. and Baffinland Iron Mines Corp., there are not manysignificant Canadian players left. A couple that have been touted aspotential targets are Grande Cache Coal Corp. and New Millenium CapitalCorp.
Financial Post