Majors Taking Savvy Approach to M&A this Cycle
Making headlines in M&A in the past couple of weeks:
- Coeur Mining (NYSE: CDE) invests C$146M into Victoria Gold (TSX: VGCX) as that Company nears commercial production
- AngloGold (NYSE: AU) ratchets up interest in Corvus Gold (TSX: KOR) with a $20M loan, secures pole position for negotiating an acquisition
- Rio Tinto Canada invests C$25.6M into Western Copper and Gold (TSX: WRN; NYSE-AM: WRN) as that Company nears a construction decision at its Casino copper-gold project
What we are seeing here is a trend in which major miners are taking strategic equity positions or ‘Toe Holds’ that often come with board positions and front-row seats to the development of these projects, prior to cutting 9- or 10-figure cheques.
It also tells us they have the luxury to do this and that the competition for assets has not reached a fever pitch yet. It’s when that competition peaks that we’ll see the Billion dollar acquisitions. Gold industry M&A is heating up and has become a new trend.
Coeur x Victoria: Gold Industry M&A Approach
- Victoria Gold operates one of Canada’s newest gold mines in the Yukon, which is nearing commercial production and has worked out many of the ‘kinks’ inherent with ramping up a new mine.
- The investment puts Coeur at 17.8% ownership of Victoria, which has a current market cap of approx. C $1billion.
- Coeur acquired this stock from Orion – a PE fund and Victoria Gold’s largest shareholder – with their own stock, so no cash changed hands.
- Victoria Gold subsequently announced a ‘Poison Pill’, which is generally used to protect against a ‘gradual’ takeover.
AngloGold x Corvus
- Junior miner Corvus Gold has entered into a $20 million loan agreement with AngloGold Ashanti North America.
- The investment by AngloGold will fund the ongoing permitting and pre-development of Corvus’ North Bullfrog project, as well as ongoing exploration of the Mother Lode and Lynnda Strip projects.
- The North Bullfrog project boasts a large, low-grade gold deposit that today’s gold price has no doubt made more interesting to AngloGold.
- Corvus’ Mother Lode is in very close proximity to Coeur’s Sterling project, which Corvus acquired in a transaction in 2018 with Northern Empire Resources.
- AngloGold is Corvus’ largest shareholder, and we see this as the beginning of a potential gradual takeover, not to mention a move to block out other potential suitors.
RioTinto Canada x Western Copper and Gold
- Rio Tinto Canada, a subsidiary of Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) has invested C$25.6M into Western Copper and Gold for a minority (8%) stake in the company.
- The funds will be put toward economic studies and permitting of Western’s copper-gold Casino project in the Yukon, to help Rio Tinto better understand the feasibility of the project.
- The Casino project is estimated to contain 965 million tonnes (MT) of proven and probable mill ore reserves and 157 MT of proven and probable heap leach reserves.
- Upon closing of the investment, Western will remain as the sole owner of the Casino project, and will continue as the operator of the project.
Rio Tinto will hold the right to appoint one member to a Casino project technical committee, and one non-voting observer to attend meetings.
- Rio Tinto will also hold the right to appoint one director of the company, but only if its ownership increases to a minimum of 12.5%.
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