OPINION: The Richmont gold deal: A sign of things to come? – by Andrew Willis (Globe and Mail – September 18, 2017)


In mining circles, the Ontario town of Wawa on the shores of Lake Superior is suddenly a hot place to do business.

Wawa, home to 3,000 souls and an enormous Canada Goose sculpture, is the closest place to buy groceries if you work at the Island Gold mine, a property that has yielded 430,000 ounces of gold for owner Richmont Mines Inc. and holds something like another 1.7 million ounces of the precious metal.

Proven reserves in politically stable jurisdictions are near the top of the shopping list for acquisitive mining companies. And Wawa is the model of stability in comparison to many of the places Canadian mining companies do business, such as Tanzania, which recently hit a Barrick Gold Corp. subsidiary with an absurd $190-billion (U.S.) tax bill – that’s billion with a “B” – as part of an ongoing dispute over three mines, or even Greece, where the government in dragging its feet on permits for properties owned by Eldorado Gold Corp.

The trend toward economic nationalism that helped bring U.S. President Donald Trump to power is also sweeping through regions with far less political stability than the United States, and the potential for turmoil can undermine the stock market valuation of miners that operate in these countries.

On the other hand, owning mines in countries where rule of law prevails – including Canada, Chile, the United States and Australia – means a company can expect to command a premium valuation. That stability was a big part of the rationale for a friendly $770-million (U.S.) takeover offer for Richmont Mines last week from intermediate gold producer Alamos Gold Inc.

For the rest of this column: https://beta.theglobeandmail.com/report-on-business/rob-commentary/canada-is-good-business-for-mining-companies-seeking-stability/article36284955/