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It’s shaping up to be a buyer’s market in the Canadian mining industry. After last year’s rout – when miners had to put acquisition activity on hold to focus on cost cutting – interest in potential takeovers is starting to pick up as companies’ shares hover at multiyear lows.
“The pendulum is starting to swing,” said Egizio Bianchini, co-head of BMO Nesbitt Burns’ mining franchise. “Generally, buyers believe that we are in a bit of a buyer’s market.”
Miners spent last year improving their financial position and are now more comfortable operating in an environment of lower commodity prices. And with plunging metal prices hammering the market capitalization of mining companies, many players are on the hunt for deals.
Even companies under pressure to improve their balance sheets are looking at possible purchases. “You never get to choose the timing of an acquisition opportunity as perfectly as you may like,” said David Pathe, chief executive of Sherritt International Corp., a nickel and energy company which has made paying down debt a priority but is also scouring the landscape for a nickel asset.
The fact that gold has shot up 10 per cent so far this year to around $1,330 (U.S.) an ounce and other metal prices are expected to rebound has helped boost confidence.
“There is a comfort level and the money is starting to flow in,” said Gene McBurney, co-founder and director at investment bank GMP Capital Inc. “We will see people building up their balance sheet for the purposes of engaging in transactions.”
So far this year, three Canadian companies have launched hostile bids and the country’s two largest gold miners have sold one of their jointly owned mines.
The problem is that miners are not happy with the unsolicited offers they are attracting.
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