BHP Billiton has joined Newcrest Mining in trying to take a stake in a little-known copper and gold explorer in a sign of miners’ renewed appetite for low-cost entry into promising projects.
The battle between two of the world’s best-known miners for a stake in SolGold, whose prize asset is in Ecuador, shows how large companies are stepping up efforts to forge partnerships with smaller rivals to restock production pipelines.
So-called “junior” companies in mining have suffered a dearth of investment since the commodities cycle turned down from 2011, while larger companies have slashed budgets for capital spending and for exploration over the same period.
With most larger miners expected to show limited appetite for large-scale acquisitions — given the lack of attractive targets and shareholder hostility after a string of overpriced deals — agreements with juniors are regaining importance.
“This is going back to a more traditional model — the market has changed and people are looking at building or improving their pipelines,” says an executive at one of the large diversified miners.
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