A cash-rich crowd hungry for base metal acquisitions – by Kip Keen (Mineweb.com – November 9, 2012)


Increasingly base metal miners have cash that needs be spent beyond their own capital projects. Time for acquisitions.

HALIFAX, NS (MINEWEB) – Basically, some junior to intermediate base metal miners have a bunch of cash sitting around they don’t need to spend on their own projects that can only really go to one thing: new acquisitions. All miners almost always talk of being on the lookout for new assets that are, as it is so often put, “accretive to shareholders.”

Yet such talk is not always matched with means by either cash, equity financing or debt. Increasingly, though, there are a number of juniors and intermediates – a couple new ones especially – that can back up their talk with cold, hard cash. Of particular note from recent quarterlies: Capstone Mining reported C$509 million in cash (and access to C$200 million in possible debt) while Nevsun Resources said it had C$379 million on hand.

More importantly, these two mountains of moola are now largely unspoken for; Nevsun and Capstone are relatively unencumbered by near term capital spends. While Nevsun is in the midst of building a copper plant as it transitions from gold production to copper production at its Bisha copper-zinc-gold mine in Eritrea, this copper plant is now mostly paid for, meaning Nevsun won’t have to cannibalize its cash to fund existing capital projects.

The unspoken-for-ness of Capstone’s cash comes as a bit of surprise. This quarter it signalled a delay in the development of its massive Santo Domingo copper project in Chile as it can’t get access to cheap power from the south of Chile until later than thought – possibly 2018 instead of the previously assumed 2016.

Santo Domingo is a billion dollar-plus project – 30-percent owned by joint venture partner Korean Resources – and the assumption was that Capstone would have to save a sizeable chunk of its cash to fund the equity portion of Santo Domingo above and beyond debt financing, which Korea Resources is to arrange. But the delay has forced Capstone to reconsider. As Capstone president and CEO Darren Pylot made clear in a quarterly conference call this week, acquisitions are very much on the table now.

“M&A will become more of a focus,” he said.

You can bet both Nevsun and Capstone will soon part with all or part of their cash in making an acquisition (assuming of course they aren’t taken over or merged with something else first.) Nevsun is nebulous about its intentions but still looking with real intent.

For the rest of this article, please go to the Mineweb.com website: http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=161714&sn=Detail&pid=102055