U.S.-Russia rift shaking up Canadian mining sector, for better and worse – by Peter Koven (National Post – July 16, 2014)

The National Post is Canada’s second largest national paper.

Escalating geopolitical tensions between Vladimir Putin and the West may be setting off tremors in Canada’s mining sector, with Russian backers withdrawing from North American assets, creating both big opportunities and major headaches for Canadian firms.

Toronto-based Corsa Coal Corp. announced Tuesday that it would purchase U.S. coal producer PBS Coals Ltd. for $60-million from Russia’s OAO Severstal — just a fraction of the $900-million purchase price that Severstal paid for PBS in 2008, which had already been discounted from a previous offer Severstal had made before the financial crisis struck.

“We think it’s a transformative deal for the company,” Corsa director George Dethlefsen said. Mr. Dethlefsen said that the Russian steel giant decided it no longer needs be vertically integrated on the coal side. Those issues made PBS expendable and gave Toronto-based Corsa a unique growth opportunity at the bottom of the coal market.

At the same time, however, Vancouver-based Mercator Minerals Ltd. is facing a dire financial position as a deal with Russian firm Intergeo MMC Ltd. appears to be on the brink of collapse.

Intergeo, which is controlled by flamboyant Russian billionaire Mikhail Prokhorov, agreed to buy Mercator last December, before the Ukrainian crisis, rescuing the company from liquidity problems. The deal would have given Intergeo ownership of Mercator’s Mineral Park mine in Arizona.

But the transaction has been held up for unexplained reasons by the Russian Federal Anti-Monopoly Services (FAS), which extended its review of the deal. If approval is not given before August 1, Intergeo has said it plans to pull its offer.

That would renew the liquidity concerns that previously dogged the company.

Mercator chief executive Bruce McLeod maintained there is no logical reason for this hold-up other than politics, as Mercator’s operations have been performing well. “My view is it’s not operations, so it must be something else,” he said.

Antipathy between the West and Russia have lately reached their highest level in decades after Moscow-backed forces began seizing Ukrainian territory in February, following a political revolution in Kyiv. That resulted in Crimea eventually being taken from Ukraine by Russia.

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