In Mining, the Trend Is Small

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“Another phenomenon is quietly playing out in Canada: a continued strengthening of merger-and-acquisition activity in the mining sector, which could boost what are now severely compressed equity valuations.”

Canadian Business, David Garofalo

Against the backdrop of current macroeconomic trends—European sovereign debt, the continued monetization of U.S. obligations, the prospect of a hard landing in China—another phenomenon is quietly playing out in Canada: a continued strengthening of merger-and-acquisition activity in the mining sector, which could boost what are now severely compressed equity valuations.

We’re not talking about the large deals for senior producers that characterized the past decade. Recent attempts at megamergers, like BHP and Potash or Xtrata and Anglo, have been found wanting by investors who viewed them as unwieldy and destructive to per-share value, and by governments and regulators who found them detrimental to competition (or politically unpopular).

Instead, we’ll see more smaller deals, in the range of a few hundred million dollars to $1 billion, for several converging reasons. . .View Full Article

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