TORONTO (miningweekly.com) – Canada was the most prolific buyer of mining and metals assets in terms of volume last year and a close contender in terms of value. Despite that, overall deals globally continued to decline on both a volume and value basis in the sector compared with 2013, advisory firm EY said this week.
“A few big deals in Canada in 2014 put us at the top in terms of deal volume. But the reality is that the majority of the deals were junior-level strategic mergers aimed at conserving cash,” EY Canadian mining and metals leader Bruce Sprague said.
According to EY’s ‘Mergers, acquisitions and capital raising in mining and metals: 2014 trends, 2015 outlook’, Canada had the top gold deal in 2014, with the joint acquisition of Osisko Mining by Yamana Gold and Agnico Eagle Mines for $3.6-billion. The next largest gold deal was the UK’s Polymetal International’s acquisition of Kazakhstan’s Altynalmas Gold (Kyzyl gold project) for $619-million.
“Gold remains the most-targeted commodity by volume. We saw that play out right here in Canada. The majority (88%) of gold deals, however, were valued at less than $50-million, reflecting distress among gold juniors on the back of squeezed margins,” Sprague explained.
Still, in its outlook, EY held that long-awaited funding from private capital funds would start to deploy across the sector as sellers aligned their value expectations with the market and assets continued to be sold by the large-cap producers in search of optimum portfolios.
“The deals we’re seeing now are a lot of mergers between equals and consolidation opportunities benefiting both parties. The large-cap producers are more focused on looking to either sell or spin off noncore assets,” Sprague noted.
EY said current market conditions were putting mining companies in a quandary – investing for the next stage of growth was potentially unpopular with shareholders, but it could prove to be a masterstroke if they wanted to fully capitalise on the next uplift in the cycle.
“For the past few years, companies have been focused on cost-reduction programmes, internal capital allocation and productivity measures. Moving forward, they need to have a broader focus on total shareholder return and make capital decisions that will support long-term value creation,” Sprague added.