With gold prices at all-time highs and a dearth of shovel-ready development projects in the pipeline, 2021 could see a lot of merger-and-acquisition activity in the B.C. mining sector, especially in gold mining.
Last year was a fairly busy one for mining M&As.
“There was at least $14 billion in M&A activity in the precious metals mining business last year,” said Rick Rule, president and CEO of Sprott U.S. Holdings. “I suspect that number increases – and I suspect it increases reasonably dramatically – in 2021.”
In 2020, sales and acquisitions of projects involving Vancouver-headquartered companies included:
•New Gold Inc.’s (TSX, NYSE:NGD) sale of its Blackwater property south of Prince George to Artemis Gold Inc. (TSX-V:ARTG) for $190 million;
•Seabridge Gold Inc. (TSX: SEA) bought the Snowfield project from Pretium Resources (TSX:PVG) for $100 million; and
•Eldorado Gold (TSX:ELD, NYSE:EGO) acquired QMX Gold Corp. (TSX-V:QMX) for $132 million in a friendly acquisition.
While some smaller B.C. companies may be prime acquisition targets, two – Equinox Gold Corp. (TSX, NYSE:EQX) and Eldorado Gold – have grown to the point where they are more likely to be the ones acquiring rather than being acquired.
Rule said there has been such an underinvestment in new discoveries that projects in B.C. in more advanced stages of development could be prime targets.
“The industry is sorely lacking high-quality exploration projects or development projects,” Rule said. “The consequence of that is, when somebody makes a good discovery, they can be taken at absolutely eye-popping multiples.”
Several analysts have tagged Pretium Resources (TSX:PVG) as a prime target for acquisition. It has only a single producing gold mine, Brucejack, but it’s a rich deposit.
Another B.C. company that could be ripe for picking is New Gold Inc., which has two operating mines, including the New Afton copper-gold mine in B.C.
SSR Mining (TSX:SSRM) is at the stage where it could go either way: be acquired by or merge with a larger company or continue to grow by making its own acquisitions.
SSR has four producing mines – in Canada, the U.S., Turkey and Argentina – and three development projects.
Analysts have pointed to Vancouver’s B2Gold (TSX:BTO) as a highly desirable acquisition for a gold mining major. It has three producing gold mines, in Mali, the Philippines and Namibia, and one development project in Colombia.
B2Gold recently passed a major milestone: the production of one million ounces of gold. The company produced $1.8 billion in gold revenue last year, a 55% increase over 2019.
But the company’s founder and CEO, Clive Johnson, has rebuffed all proposals to date and has said any potential buyer would have to pay a hefty premium.
As for Equinox and Eldorado Gold, both have executed a number of acquisitions and both are more likely to be the ones doing the buying, rather than being acquired.
B.C. mining M&A potential players
Here are the B.C. companies that could be on the radar of mining majors, or companies poised to become majors through their own mergers and acquisitions:
Pretium Resources (TSX:PVG)
Market Cap: $2.5 billion
Mines: One in B.C.
Production: 347,743 ounces gold, 2020
New Gold (TSX:NGD)
Market cap: $1.7 billion
Mines: Two operating
Production: 293,139 ounces gold 2020
Market Cap: $7 billion
Mines: Three operating, two in development
Production: 1 million ounces gold, 2020
Eldorado Gold (TSX:ELD)
Market Cap: $2.4 billion
Mines: Four in operation, one in development
Production: 528,874 ounces gold 2020
SSR Mining (TSX:SSRM)
Market Cap: $4.8 billion
Mines: Four operating, three in development
Production: 711,000 ounces gold 2020