After a rocky 2018, consolidation will create opportunities, new report says
Waters remain turbulent, but the country’s mining industry seems to be coming out of the storm. Although the sector took a hit on the Toronto Stock Exchange last year, recent mega-deals could help right the ship, according to PwC Canada’s latest Canadian Mine report.
The study, which focuses on the top 25 public Canadian mining by market capitalization, shows that they had little love from investors in 2018. The aggregate valuation of mining companies on the TSX fell to roughly $254 billion, PwC reports, a plunge of 12.7 percent that surpassed the exchange’s 10.8-percent drop in market cap.
Liquidity also took a dive, with volume and value of Canadian mining stocks dipping 21 and 20 percent, respectively. Forecasters have called for metals prices to stabilize in the years ahead, PwC notes, but a big upswing looks unlikely.
However, recent mergers and acquisitions are a hopeful sign for the sector. In one blockbuster deal, shareholders of Vancouver-based Goldcorp have approved its purchase by U.S. giant Newmont Mining Corp. The third wheel of the US$10-billion merger, an unsolicited takeover bid by Toronto-based Barrick Gold Corp., added fuel to the M&A trend, even though Newmont’s board firmly rejected it.
More good news on the M&A front: Lundin Mining has announced a $1-billion deal to acquire fellow Toronto company Yamana Gold’s copper and gold mine in Brazil.
“While recent mergers were a sign of a wave of consolidation that will help companies better compete for capital, we can expect even more M&A activity in the near future,” Dean Braunsteiner, PwC Canada’s national mining leader, said in a statement. “That creates a cascading effect of further deals as companies sell off non-core assets, which brings new opportunities for management teams to build the next big Canadian mining company.”
It’s also important to note that potash and gold drove the Canadian mining industry in 2018. The rest of the top 25 companies took a back seat to Nutrien, a Saskatoon-based fertilizer titan created from the marriage of Agrium and Potash Corp. of Saskatchewan. Nutrien’s $40-billion market cap nearly doubled Barrick’s.
In the end, though, most of what glitters is gold. The precious metal dominated the top 25 again in 2018, PwC notes. All told, 21 companies had exposure to it, an uptick from 19 last year.