Mining companies looking for takeovers find prospects growing thin
Sun Feb 18, 5:35 PM
By Craig Wong
ca.news.finance.yahoo.com
VANCOUVER (CP) - Mining companies, flush with cash from record metal prices, may be on the hunt for Canadian acquisitions to build scale or add new development projects, but the list of high-grade prospects is beginning to look thin.
In the last year or so, investors have seen such fabled Canadian mining companies as Inco, Falconbridge and Placer Dome fall from the landscape.
"Eventually you run out of companies," said Kerry Smith, a mining analyst for Haywood Securities.
Smith said everyone is always looking for the next acquisition target, and some development-stage companies may look attractive, but the list of potential takeovers is getting shorter.
"There's not a lot companies, to be honest, that are at a stage where somebody wants to buy them."
Smith noted that Lundin Mining Corp. (TSX: LUN.TO) has said it is looking to make a big deal.
"I don't know what it is going to be, but my guess is that it is likely to be another producer of a similar size to them," Smith said.
Lundin merged with EuroZinc Mining Corp. last year to create a new company worth about $3.7 billion with four mines in Portugal, Sweden and Ireland and a fifth scheduled to come into production this year.
Smith said Inmet Mining Corp. (TSX: IMN.TO), HudBay Minerals Inc. (TSX: HBM.TO) or Aur Resources (TSX: AUR.TO) all might attract Lundin.
"That would be the kind of deal they would look at," he said.
Pacific International Securities analyst Michael Gray said Aurelian Resources (TSXV: ARU.V) is "in the takeover sweet spot."
Shares in the company closed up $1.56 at $28.44 on the Toronto Stock Exchange Friday, and Gray has a $53.60 12-month price target.
With a market value of around $900 million, Aurelian's main asset is its Condor gold discovery in southeast Ecuador
"We believe Aurelian's high-grade Fruta del Norte gold deposit on its Condor Project is the best junior-controlled gold discovery we have seen in the past decade," Gray wrote in a note to clients.
"Quality ounces, 100 per cent ownership and a district-scale land position place Aurelian in the middle of the takeover sweet spot."
Last week, UrAsia Energy (TSXV: UUU.V) and Sxr Uranium One Inc. (TSX: SXR.TO) announced plans to merge to create a major global uranium player named Uranium One Inc., trailing Saskatchewan's Cameco Corp. (TSX: CCO.TO) among the world's biggest publicly held producers.
Agnico-Eagle Mines Ltd. (TSX: AEM.TO), meanwhile, agreed to buy Cumberland Resources Ltd. (TSX: CLG.TO), owner of the Meadowbank gold project in Nunavut, in a deal worth more than $700 million.
But the elephant in the room remains Teck Cominco Ltd. (TSX: TCK-B.TO).
With $5.3 billion in cash after its failed attempt to buy Inco, the Vancouver-based company is one of the few major Canadian-controlled base-metal enterprises left.
Teck Cominco has made several smaller deals recently including investments in Nautilus Minerals Inc. (TSXV: NUS.V) and Tahera Diamond Corp. (TSX: ATH.TO), and it plans to buy back up to 20 million shares, but chief executive Don Lindsay will still be left with a substantial hoard to spend.
"He certainly came in with high expectations from the street that he would try and do a large transaction," Smith said,
"But there's not many assets out there they can buy." |
