Canadian Mining Journal

Feature

Canada shines in risk-off climate

Offshore companies buy into Canada for stability.



In a still-tepid M&A market in mining, any trends that develop stand out all the more clearly. One such trend jumped out at us this year: the popularity of established mining districts across North America.

Many of these deals involve Canadian mining companies with significant overseas exposure buying projects in Canada to lower their risk profile. That’s not to say they’re working in highly unstable countries. But these companies have had some unpleasant surprises that have made doing business harder or put their assets in jeopardy.

Alamos Gold, which has several development projects in Turkey, has encountered permitting delays there, including the overturning of its EIA permit for its Kirazli project by an administrative court in 2014. The EIA has since been reinstated by a higher-level court, and further permits have been granted.

But the miner, which already had two operating mines in Mexico, has recently turned to Canada for new acquisitions. Alamos bought Richmont Mines this year for its Island Gold mine in Ontario, and in 2015, it picked up AuRico Gold for its Young-Davidson mine in Ontario.

Centerra Gold has really taken a shine to Canada as a dispute with the government of Kyrgystan regarding its Kumtor gold mine dragged on. While the two parties recently came to a settlement agreement after 18 months of negotiations, it cost Centerra Gold a one-time payment of US$57 million to two newly established, government- administered funds, and accelerated reclamation payments of US$6 million a year. The government had wanted US$300 million in environmental fees.

In 2017, Centerra purchased AuRico Gold spinoff AuRico Metals for its Kemess copper-gold project, in B.C.; last year, it acquired Thompson Creek Metals for its Mount Milligan gold-copper mine in B.C.; and in 2015, it signed a deal to earn up to 50% of Premier Gold’s Greenstone gold project in Ontario.

Finally, Eldorado Gold recently launched legal action against the government of Greece and threatened to pull out of the country, where it has several advanced projects as well as one operating mine. (The company also has two operating mines in Turkey.) Eldorado put its Skouries project on care and maintenance in November, saying that development has faced “unjustifiable.”

This summer, Eldorado acquired Integra Gold for its Lamaque gold project in Quebec. Interestingly, the project is its first and only project in North America.

Some of the other recent acquisitions that have taken place recently are in the U.S. (Nevada, Idaho) and Mexico (Sonora state).

In North America, we’re seeing a little bit of political instability of our own, namely uncertainty around the current North American Free Trade Agreement (NAFTA) talks.

While those negotiations, which were initiated by U.S. president Donald Trump’s administration, could mean higher costs for miners and a hit to the economies of all three signatory countries if NAFTA is dissolved, they won’t undo the conditions that make North America a safe and profitable place to invest.


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