* Senior miners avoid M&A after unpopular deals
* Juniors struggling to survive, seek takeovers
* Mid-tiers positioned to get first pick
* HudBay seeks next generation of projects
By Julie Gordon
TORONTO, March 6 Most of the world's top miners
are shying away from takeovers this year, clearing the way for
mid-tier producers like HudBay Minerals Inc to make
competitive bids for assets coming up for sale, the company's
CEO told Reuters at a Toronto mining convention.
After being burned by costly deals made during the boom,
most major metals companies have pledged to rein in costs - with
some even looking to divest non-core assets.
That's a big shift from just two years ago, when soaring
metal prices had the majors elbowing out the smaller guys to get
their hands on the best projects, said David Garofalo, chief
executive of HudBay, on the sidelines of the Prospectors and
Developers Association of Canada convention in Toronto.
"As long as I've been in the business the seniors have been
buying, buying, buying - trying to fill out an increasingly
large pipeline," he said. "Now they're selling."
The change is creating opportunities for smaller base metal
miners, which have been consolidating in recent years with
tie-ups such as the KGHM Polska Miedz takeover of
For those able to finance a deal in the current market,
there are both producing assets and development-stage projects
available for the taking.
HudBay, which produces copper, zinc and precious metals at
mines in Manitoba, already has two major projects under
construction - the Lalor mine, also in Manitoba, and the
Constancia project in Peru. It is eyeing only smaller deals for
"We're looking at a lot of things," Garofolo told Reuters.
"We're better off picking up something in the pre-feasibility or
scoping stage that we could bring into construction once Lalor
and Constancia are built out."
The idea is to buy within the year, complete the development
work, and have projects ready to go when the current builds are
"To introduce that next-generation growth you have to be
thinking about picking up something today," Garofolo said.
ARMS IN THE AIR
While most juniors hope one day to be swallowed up by a
larger player, the need to secure a deal is looking desperate
for many smaller companies struggling to find the cash to stay
afloat, let alone to complete exploration work.
"There's a lot of arm-waving involved," said Garofolo.
"Particularly in this market where they're capital starved -
they're waving their arms more vigorously than they otherwise
Capital has dried up across the sector, and equity financing
is so dilutive at current share prices that almost no one is
pursuing it. With valuations low and the situation dire for many
of the juniors, there are opportunities to be had on the floor
at the PDAC convention.
While Garofolo declined to comment on specific companies, he
reiterated that HudBay's focus is on base metal projects in the
HudBay had about C$1.34 billion in cash and cash equivalents
as of Dec. 31. The company is planning some C$1.24 billion in
capital spending in 2013, with the bulk earmarked for the
The company plans to hit peak construction at the $1.5
billion Constancia project in Peru around mid-year, with first
ore expected by the end of 2014.
While wages remain high in the South American country, a
slowdown of other development activities has left a decent labor
supply for the bulk of the construction, said Garofolo.
"This is a great time to be building," he said. "As a
smaller producer you don't want to be building when everyone
else is - you'll get trampled to death."
HudBay shares were down 0.11 percent at C$9.47 shortly after
market open on Wednesday on the Toronto Stock Exchange. The
share price is down about 25 percent over the past 12 months.