TORONTO (miningweekly.com) – A lot of the mining industry, particularly juniors, still have a very conservative attitude towards merger and acquisition activity, Ernst & Young Canada mining leader Tom Whelan said on Wednesday.

A lot of predictions have been made this week as at the Prospectors and Developers Association of Canada convention, regarding the likelihood of a boom in corporate activity in the mining sector.

However, there is still often a “real gap” between buyers and sellers, and boards are heavily focused on being able to justify any transaction, Whelan said in a presentation on the final day of the event.

As a result, there is a "psychological block" against corporate activity, even for those companies that also do not seem to have an intention to eventually go on and develop their projects themselves, he said.

Firms with something to sell will likely have some time to get used to the idea, though, as they face “a very patient buying market, who know they can wait it out”, Whelan commented.

He agreed that China will continue to play an important role in mining sector M&A and commented that Chinese investors have proved quick learners as they pursue mining companies, and are modifying their approach to acquisitions.

“Whereas in the past, it was, 'we want 100% control', today, they are looking at different arrangements, different alternatives.”

Earlier this week, Canadian copper producer Quadra Mining announced it planned to form a joint venture in Chile with Chinese utility State Grid Corporation, to raise funds for the development of a copper/molybdenum project.

FINANCING

When it comes to financing, Whelan said Ernst & Young expects that the next wave of expansion by the mining sector will be increasingly funded by equity.

“We don't see banks returning to the space. We don't think its achievable, and as a matter of fact, we don't think it's desirable to build mines with debt.”

He said there will likely be more initial public offerings, and Ernst & Young also continues to predict a return to listing individual mines, as a way to raise capital for project funding.