TORONTO (Reuters) – A four-year mining-industry downturn has left big gold producers hungry to buy reserves they haven’t had the money to find themselves, and impoverished small miners eager to cash out, setting up the ingredients for mergers and acquisitions revival in 2015.
Mining veterans say that scenario is likely to come into play at the industry’s largest annual event, the Prospectors and Developers Association of Canada convention in Toronto, March 1-4, where more than 20,000 participants are expected.
Many small explorers and developers, cash-strapped after years of austerity, may be looking to attract buyers at the convention.
Big gold miners, meanwhile, have been hit by weak commodity prices that have forced them to slash exploration budgets, slowing new discoveries, and contributing to a drop in in-the-ground reserves at the world’s five biggest bullion producers.
Their reserves, cumulatively, fell 11 percent to 317 million ounces in 2014, company data show. If reserves continue shrinking, production will eventually follow.
“The big mining companies still know they have to buy projects … If you don’t buy new assets you just watch your business decline,” said John Gravelle, global mining leader at consultancy PwC.
With several deals sealed in recent weeks, there are hopes more will come, reversing a three-year slowdown. Tahoe Resources Inc THO.TO is buying Rio Alto Mining RIO.TO for C$1.4 billion ($1.12 billion) and Goldcorp Inc G.TO is purchasing Probe Mines Ltd PRB.V for C$526 million.
In 2014, the value of global mining M&A fell 19 percent from 2013, to $79 billion, Thomson Reuters data show.
“This is going to be a year where there will be a lot of activity in the mining M&A space,” said Paul Stein, a mining lawyer at Cassels Brock & Blackwell.
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