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TORONTO – The past couple of weeks provided a jolt that the Canadian mining industry’s bankers and lawyers have awaited for a long time.
But is it sustainable? Insiders are far from convinced. Since the start of October, there have been two sizeable private equity mining deals announced, plus a US$1.8-billion asset sale and related financing that got a better reception from the market than almost anyone imagined.
While mining M&A has moved along at a decent pace this year, these transactions stood out from the pack. Private equity, for one, has been the talk of the mining business for months. There have been predictions that a wave of private equity investment is set to pour into the cash-needy sector and give it a lift, but those deals simply have not materialized the way the industry expected.
Two transactions this month gave Canadian miners some renewed hope: Magris Resources Inc.’s private equity-backed $500-million acquisition of the Niobec mine in Quebec, and a $73-million takeover of Chaparral Gold Corp. involving private equity firm Waterton Global Resource Management LP.
Outside of private equity, the big announcement was Lundin Mining Corp.’s US$1.8-billion purchase of Freeport-Mcmoran Inc’s 80% stake in the Candelaria mining complex in Chile. To get the deal done, Lundin arranged a complex US$2.2-billion financing package. That includes a US$600-million bought deal, the single biggest mining equity financing of the year. It got a terrific reception from shareholders despite rough market conditions, as Lundin shares traded well above the $5.10 offer price after the stock was sold early last week.
“The good news is there seems to be quite a bit of support for the right stories,” said John Turner, head of the global mining group at Fasken Martineau LLP.
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