Even in this market, miners see assets worth overpaying for – by Brian Milner (Globe and Mail – April 17, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The bargain-hunters scouring the mining world for dirt-cheap acquisitions must be getting frustrated. The battle for Osisko Mining Corp. in Quebec and a Chinese company’s full-price purchase of a Peruvian copper mine show that softer demand, weaker prices and the pounding many miners have taken in the stock market aren’t pushing producers to part with valuable core assets for chump change.

Miners’ willingness to hang tough suggests the battered sector has reached a bottom. Producers are willing to wait and for good reason – there is an increased willingness among potential buyers to pay top dollar for high-quality assets.

In the Osisko case, Yamana Gold Inc. and Agnico Eagle Gold Inc. have reached a friendly deal to buy the Montreal-based gold miner for $3.9-billion and divvy up its assets. The stock and cash offer works out to $8.15 a share, 11 per cent above a revised bid from Goldcorp Inc.

Goldcorp sweetened its original hostile offer by about $1-billion to $3.6-billion when it became apparent that Osisko wasn’t about to be low-balled on its prized Canadian Malartic mine in Quebec. Gold prices may have stumbled, but Malartic is a terrific asset, with large reserves and relatively low costs. What’s more, Osisko has already done the heavy lifting on the project, getting it past the higher-risk stages and into steadily increasing production.

Goldcorp isn’t throwing in the towel just yet. But, if it intends to win, it’s going to have to fork out a lot more cash than it intended, regardless of current market conditions.

In the Chinese copper deal, a consortium led by state-controlled China Minmetals Corp. is acquiring the Las Bambas mine in Peru from Glencore Xstrata PLC for close to $6-billion (U.S.) in cash and an agreement to pick up this year’s expense tab as the mine nears production. The huge project is expected to produce 400,000 tonnes of copper a year starting in 2015. That would amount to 12.5 per cent of China’s copper imports last year.

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