The merger-go-round is spinning again, perhaps not with the breakneck speed it had in 2006, but at a good pace nonetheless. That was the year that the hard-fought battles for Inco and Falconbridge brought new names – Vale and Xstrata – to Canadian nickel producers.
The worldwide value of mergers and acquisitions in the mining sector rose about 50% last year to more than US$100 billion. Tucked away in the total are many deals between smaller miners, but three big deals stand out.
Swiss mining giant Xstrata (fourth largest in the world) and commodities trader Glencore International, also a Swiss enterprise, are in merger talks to create a business with an estimated capitalization of $80-billion. This would likely be an all-share deal, and Xstrata shareholders will undoubtedly expect a premium on their shares. Glencore already has a 34% interest in Xstrata. The combined company might be a potential world-beater.
A subsidiary of Jilin Jien Nickel, the Chinese firm, has made an offer for Goldbrook Ventures of Vancouver, offering to pay a 59% premium over the Goldbrook closing price of the last day of trading before the offer was made. The two companies are partners (Jilin 75%, Goldbrook 25%) in the Nunavik nickel project in northern Quebec. The project is under construction.
Vancouver-based Quadra FNX, operator of six copper mines in Canada, Chile and the United States, has agreed to be bought out by KGHM Polska Miedz of Poland. KGHM has made an all-cash $15 per share offer for all outstanding shares and warrants of Quadra. The total transaction value is approximately $3.5 billion. Quadra’s advisors have recommend shareholders accept the offer.
M&A activity has not been far from the surface lately, but often it is junior companies involved. Now there are three that could substantially change the face of the Canadian mining industry as control passes beyond our borders.