Spate of Mine Takeovers May Be Start of Deal Heavy 2010
Source: Reuters, Cameron French (1/11/10)
". . .everybody seems to be refocusing their attention on growth."
New sources of financing are opening up as banks slowly return to the lending game and commodity-hungry China opens its coffers to partners, providing plenty of incentive for larger players to feed on smaller developers.
"Most of the (miners') financial positions are much stronger than they were a year ago and everybody seems to be refocusing their attention on growth," said Haytham Hodaly, analyst at Salman Partners.
Goldcorp Inc. (NYSE:GG, TSX:G), which has been growing aggressively in recent years, is currently wrapping up two acquisition bids on foreign soil.
In Chile, the company said last week it would spend $513 million to acquire Xstrata's 70% stake in the El Morro copper-gold project, trumping an existing bid from rival Barrick Gold, the world's largest gold company.
Goldcorp also just finished fighting off Penmont, a joint venture of gold and silver heavyweights Fresnillo and Newmont, to clinch the takeover of Canplats Resources Corp. (TSX.V:CPQ), which is focused on the Mexican mining space.
That followed Cliffs Natural Resources' victory over Noront Resources in a battle for Canadian chromite explorer Freewest Resources, and comes as royalty companies Royal Gold Inc. (TSX:RGL, Nasdaq:RGLD) and Franco Nevada Corp. (FNV.TO) both bid for smaller rival International Royalty, with Royal winning agreement on a C$640 million offer.
The return of hostile bidding, which was a feature of the red-hot 2006-2008 M&A boom, suggests companies are again prepared to be aggressive to lock down new assets.
The recent activity follows a year of cautious rebound from the 2008 crash in metal prices. Industry players say that now, with gold having held above $1,000 since October and base metals still churning higher, potential buyers may have hit a point of comfort with the economics of adding assets.