(Repeats March 4 story without changes)
* World's largest annual mining convention set to kick off
* Miners ebullient with metal prices near record highs
* M&A activity in sector expected to gather pace in 2011
By Euan Rocha
TORONTO, March 4 This year the world's biggest
mining convention could turn into a bonanza for dealmakers as
eager mining companies look for ways to take advantage of a
raging bull market for metals.
The event, organized by the Prospectors and Developers
Association of Canada (PDAC), brings together nearly everyone
who is anyone in the world of mining -- and it gives miners an
unparalleled opportunity to talk shop and strike deals.
The dealmaking that PDAC could stir up this year may very
well shift into overdrive, according to many of those who will
attend, as the industry responds to a number of powerful,
Prices of base metals are near record highs, while surging
demand is only expected to accelerate, fueled by the building
booms of China, India and Latin America. At the same time,
major producers are expecting their production to contract
unless replacements can be found.
Gold and silver miners are benefiting from one of the
biggest sustained rallies in modern history, driven by
inflation concerns, political turmoil, an uneven U.S. economic
recovery and the European sovereign debt crisis.
That means junior miners and explorers -- those with assets
that are close to going into production -- have never had it so
good. Established miners are motivated buyers willing to pay
top dollar for high-quality properties that can be developed
"I think deal activity is going to intensify, because
companies' cash flows are enormous and lots of companies aren't
replacing their production," said Donald Coxe one of Canada's
most influential money managers.
The solution for many is to find attractive junior miners
and explorers with projects that require little lead time
before they can begin producing. For a major producer shopping
around or a junior looking to sell, the PDAC convention in
Toronto is a must-attend showcase.
"There are a lot of deals done during the convention. If
you have a property you want to get rid of, or put into a
company, or if you are a company looking for properties it is
the best place you can go," said Terry Schorn an adviser to
exploration company Eagle Hill EAG.V.
"For me the best part of it is meeting people, it's a great
place for contacts ... Quite often a deal does not happen at
the convention, but you meet somebody and follow up and deals
get done later," said Schorn, a veteran geologist who has
attended the PDAC event since 1953.
With record cash flows, many miners have opted to initiate
or raise dividends, while others are opting to use their new
wealth to buy assets and secure long-term supplies. Exploration
companies at the event are eager to show off their wares.
"We'll be looking at other opportunities, other companies
that are (at PDAC)," said Chief Executive Robert Quartermain of
gold explorer Pretium (PVG.TO). "We'll be meeting with majors
so they fully understand the opportunity that we have."
The annual PDAC event attracted more than 22,000 attendees
last year, and with metal prices soaring, an even larger
audience is expected this year.
For graphic on top mining deals in 2010:
For graphic on copper, silver and gold prices:
For graphic on base metal price outlook:
For more stories on PDAC convention: [ID:nN02153893]
Canada is a natural home for the event, as the Toronto
Stock Exchange and the small-cap TSX Venture Exchange are home
to close to 60 percent of the world's publicly listed mining
companies. In fact, miners and exploration companies account
for more than 40 percent of the roughly 3,700 companies listed
on both exchanges.
John Nyholt, who heads PwC's M&A services team, notes that
the conference started off with miners coming out of the bush
looking to raise finances and show off their finds.
"They still have all these booths and tables, where you can
go and invest in a small mining deal ... Today there is a
strong technical aspect to the program, but the fund-raising
stuff, it still happens," said Nyholt.
In a report published on the eve of the convention, PwC
predicts that deal activity is only expected to gather pace
this year, as the prices of metals rise even further.
"We are definitely going to see a strong pace in 2011 in
terms of volume and we also believe we will see more mega
deals," said John Nyholt, who co-authored the PwC report.
With the ongoing political turmoil in the Middle East and
North Africa, Donald Coxe argues that gold prices are likely to
rise even further.
Gold rose above $1,430 an ounce on Friday, while silver
surged 3 percent to 31-year highs, as soaring oil prices fueled
by widening unrest in Libya prompted investors to pile into
safe havens. [ID:nLDE7230V3]
Bullion already hit a record high of $1,440.10 an ounce on
Wednesday and is on track to rise further on fears that Libya's
escalating violence could spread across the Arab world. Coxe
believes these record prices are only going to fuel further M&A
activity among precious metals miners.
"Mining companies have a choice between paying out more
money in dividends, or expanding their ore reserves and I think
we are going to have more M&A," said Coxe, a former Bank of
Montreal strategist who now heads Chicago-based Coxe Advisors.
"The greatest amount of activity is going to be in the
precious metals group, because the companies having gotten out
of their hedging programs a couple of years ago are now making
a lot of money, so I think there's going to be lots of
takeovers of gold companies," he said.
(Reporting by Euan Rocha, Pav Jordan, Julie Gordon and Cameron
French; Editing by Frank McGurty and Rob Wilson)