One can only guess at what New Years resolutions Canadian mining companies are making for 2006. A quick look back at 2005, however, reveals that hundreds of them must have resolved to get bigger through mergers and acquisitions. Consolidation last year brought together some of the biggest and brightest mining minds.
There is nothing like a multi-billion-dollar merger to make the daily press sit up and take notice. And if one is exciting, two is even more so.
BARRICK GOLD announced in November that it would spend US$9.2 billion to gain control of PLACER DOME. The latter company said the offer was inadequate and resisted Barrick’s move. The resistance paid off. Last week Barrick upped its offer to US$10.4 billion, and the deal is on. GOLDCORP is in on the action having agreed to pay US$1.485 billion to buy up certain Placer assets in Ontario.
In October FALCONBRIDGE said it had accepted INCO LTD.’s friendly Cdn$12.5 billion takeover offer. The move will make Inco once again the world’s largest nickel producer and rates it in the top 10 for zinc and copper. The deal is to close at the end of January 2006.
The Inco offer followed this summer’s merger of Falconbridge and NORANDA, a deal worth Cdn$3 billion. Sadly, the Noranda name has disappeared from the corporate world after 83 years. The Noranda-Falconbridge combination put a stop to takeover talks with the Chinese for Noranda and the creeping takeover by Swiss-based XSTRATA, which had spent Cdn$2billion to acquire about 20% of Falconbridge.
There were scores of lesser deals last year, too. COMPANHIA VALE DO RIO DOCE (CVRD) bought a 93% interest in CANICO RESOURCE for $940.6 million. WESDOME GOLD MINES and RIVER GOLD MINES are merging. COMMITTEE BAY RESOURCES and MATADOR EXPLORATION have been united. SHORE GOLD and KENSINGTON RESOURCES are one. SOUTHERN CROSS RESOURCES and South African ALFEASE GOLD AND URANIUM RESOURCES are combining under the name SXR URANIUM ONE.
The list goes on: NORTHGATE MINERALS and YOUNG-DAVIDSON MINES; JILBY GOLD EXPLORATION and HIGH RIVER GOLD; GOLDCORP and WHEATON RIVER MINERALS; INTREPID MINERALS and Australian NUSTAR MINING; NUSTAR RESOURCES and CANDOR VENTURES (creating CANSTAR RESOURCES); DUNSMUIR VENTURES and privately held PEREGRINE DIAMONDS; CREW GOLD and GUINOR GOLD; FARALLON RESOURCES and CONTINUUM RESOURCES; SAN GOLD and GOLD CITY INDUSTRIES; ROMARCO MINERALS with Americans WESTERN GOLDFIELDS and U.S. GOLD; FNX MINING and AURORA PLATINUM; ELGIN RESOURCES and JONPOL EXPLORATIONS; AMERICAN BONANZA GOLD MINES, INTERNATIONAL TAURUS RESOURCES and FAIRSTAR EXPLORATIONS; SOUTHERN PERU COPPER and GRUPO MEXICO, MINERA MEXICO; and many, many more.
We expect the takeover trend to continue in 2006. Because mining is a global industry, size matters. Any merger that creates a stronger international producer will boost potential profits of Canadian companies.