Today I am very happy to be a mining industry observer rather than a financial markets analyst. The world’s financial markets are still reeling over the collapse, takeover and/or bailouts of major institutions. The rejection of the Bush administration’s original $700-billion plan for American bankers by the House of Representatives sent stock markets yo-yoing up and down earlier this week. Some variation on the plan must be passed or the worst-case scenario for the U.S. banking industry might be total collapse. The problem goes back to the asset backed commercial paper (ABCP) mess I wrote about in the Net News of Aug. 22, 2007, and the CMJ print editorial in the September 2007 issue. I won’t rehash that here, except to say the problem has only gotten larger since then.
Some mining analysts think this is a perfect time for major mining companies to enter the takeover contest for their smaller cousins. I’m not so sure. There may be bargains out there. It is not a secret that the TSE Global Mining Index is off sharply. (Readers who wish to track this index can do so at www.TSXMoney.com.) Any company wishing to snap up a bargain had better have money in the bank, preferably a reputable Canadian bank.
Swiss mining conglomerate XSTRATA PLC has announced that it is not going to proceed with a takeover offer for platinum producer LONMIN PLC of London, U.K. Xstrata cites “the current unprecedented uncertainty in the financial markets” and the rising cost of financing the deal in its decision. Xstrata has, however, acquired 24.9% of the outstanding ordinary shares at a cost of US$1.77 billion. I wonder if Xstrata will hold or sell its Lonmin shares.
Meanwhile, three Canadian mergers have proceeded.
COMMITTEE BAY and NIBLACK MINING, both headquartered in Vancouver, have completed their merger. The transaction will create CBR ALASKA HOLDINGS, a wholly-owned subsidiary of Committee Bay. The merged company will focus on advancing both the Niblack VMS project in southeast Alaska and the Committee Bay gold project in Nunavut.
Vancouver-based GOLDCORP has completed its merger with GOLD EAGLE MINES of Toronto. Of interest to Goldcorp is Gold Eagle’s Bruce Channel discovery near Red Lake, Ontario. The property is southwest of Goldcorp’s Red lake mine and contiguous to its Cochenour-Willans project. Goldcorp now controls 8 km of strike length along the Red Lake Trend.
VICTORIA GOLD of Toronto and GATEWAY GOLD of Vancouver have signed a definitive agreement for Victoria’s takeover of Gateway. Gateway shareholders will received half a Victoria common share for each Gateway share they hold. Business will continue under the Victoria Gold name. Closing in anticipated near the end of November 2008.
I’d like to think Canadian companies have faith in their financial underpinnings.