Big Miners Go Shopping for Production Assets
Source: Reuters, Cameron French (4/11/10)
". . .I anticipate there being a lot more deals."
These shoppers are on the hunt for billions in buried copper and gold, as scarce resources combine with recovering markets to kick off a flurry of mining takeovers.
Spurred by strong economic signals, rising metal prices and rebounding stock markets, established miners have come out in force to snap up assets needed to ensure their future production.
While there has been a trickle of deals in the wake of the 2008 resource price meltdown, potential buyers appear to have gained enough confidence from recent market signals to take on a bit of risk through acquisitions.
"I think the comeback of the capital markets really has helped a lot," said Egizio Bianchini, global head of mining at BMO Capital Markets.
"Assuming the market stays the way it does right now, I anticipate there being a lot more deals."
For investors eager to wring some value out of recently stagnant mining stocks—Toronto-listed miners are currently trading at December 2009 levels—getting in on a resource play ahead of an acquisition can pay big dividends.
Exeter Resource Corp. (NYSE.A: XRA; TSX:XRC; Fkft:EXB) shareholders have enjoyed an 18% rise in the gold explorer's stock since Reuters quoted a company official on Tuesday saying it had signed confidentiality agreements—which can sometimes signal a deal in the works—with gold majors Barrick, Newmont and Kinross.
Exeter owns the massive Caspiche project in Chile, with resources of 24.3 million ounces of gold, 6.4 billion pounds of copper and 60.3 million ounces of silver.
The M&A activity appears to already be having a positive impact on shares of smaller resource companies, which have generally been the targets.