Canada's Base Metal Miners May Catch .......Canada's Base Metal Miners May Catch Merger Fever
Monday, January 10, 2005 4:27:04 PM ET
By Nicole Mordant
VANCOUVER, British Columbia (Reuters) - After a whirlwind of takeover attempts in Canada's gold mining industry last year, analysts say the buying binge could shift to the base metals sector this year.
Many copper, zinc and nickel miners are sitting on valuable equity they could use for acquisitions thanks to shares that have more than doubled in value over the past two years as base metal prices rose.
Add to this mix, expectations that demand for metal will remain high this year and that new, rich mineral discoveries by producers remain scarce, and the time could be ripe for mergers and acquisitions.
"There is now an environment where base metals companies will get to play the same game as gold companies," said Michael Kenyon, chief executive of Canico Resources Corp. , a small Canadian miner with a large nickel project in Brazil.
"They've got the currency to be able to do it, they've got the cashed up treasuries, debt has been paid down and just like anybody else they are looking for opportunities to grow in a good environment," he told Reuters.
Last year, there were six, billion-dollar-plus takeover attempts involving North American gold producers wanting to use their high-priced equity to expand.
"At the peak of the cycle, equity is at its highest value as a currency. That is the time to use that currency," said Eric Zaunscherb, analyst at Raymond James in Vancouver.
"Since we are near the peak of the metal price cycle ... one gets into that whole consolidation phase," he said.
As in the gold sector, exploration for new resources took a dive in the base metals sector from about 1996 until 18 months ago when budgets were slashed because of low metal prices.
"There are a lot of mid-tier producers that don't have a lot of resources to grow. They either have to find something or to buy something," said Donald McInnes, president of Blackstone Ventures Inc. and Western Keltic Mines Inc. , two small mineral exploration companies.
Among mid-sized producers, Aur Resources Inc. , whose attempted merger with rival Inmet Mining Corp. fell apart last year, is seen as a likely purchaser as it tries to beef up a sagging production profile.
Small exploration firms have mushroomed as rising metal prices encouraged investors to sink money into the sector, and those with interesting projects could become takeover targets.
More than one analyst mentioned Frontera Copper Corp. , Corriente Resources Inc. and Chariot Resources Ltd. as possible desirables.
Canico is another and Kenyon confirmed that his company had signed a "number" of confidentiality agreements with others.
Among the bigger players, nickel producer Inco Ltd.'s name keeps coming up as a rival bidder for Australia's WMC Resources , which is in play.
But Canaccord Capital analyst Greg Barnes sees Inco's attention focused on its own big projects and questions why it would be interested in WMC's copper and uranium assets.
Those watching Noranda Inc. are waiting for news of a takeover by China Minmetals, while speculation mounts that the recent appointment of a merchant banker as chief executive at Teck Cominco is not without reason.
<13br>https://www.metronews.ca/reuters_business.asp?id=50010