Mega deals bring mining back into the spotlight despite lackluster industry growth

TORONTO, April 25, 2019 /CNW/ - The aggregate valuation of all mining companies on the Toronto Stock Exchange (TSX) declined by 12.7% in 2018, to $253.9 billion, compared with a 10.8% decrease in the market capitalization of the entire TSX market according to PwC Canada's recent Canadian Mine report. Liquidity also fell for the second year in a row, with the volume and value of TSX mining shares trading down by 21% and 20%, respectively. While forecasts suggest prices for commodities like gold and other metals will stabilize in the coming years, there are few signs of a significant upswing.

Despite unfavourable market conditions, it has been an interesting ride for mining. Recent M&A activity has brought the industry back into the spotlight after years of speculation around how the sector could regain power. After a period of internal restructuring, it appears that companies are now looking outward for opportunities.  

The mega deal trend was a definite bright spot for mining in 2018 and continues to make headlines in 2019 with the highly publicized deals involving Goldcorp Inc. and Newmont Mining Corp., which then also found itself the target of a takeover bid by Barrick Gold. And just recently, Lundin Mining Corp. announced a $1-billion deal to acquire a Brazilian copper and gold mine from Yamana Gold Inc. While some companies may resist formal mergers, joint ventures have been seen as an alternative way of generating synergies and accessing capital for growth.

"Last year marked a turning point for the mining industry, and 2019 brings even more possibilities for companies to position themselves for the next stage of growth," said Dean Braunsteiner, National Mining Leader, PwC Canada. "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. 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."

Overall mining growth was heavily powered by potash and gold. Nutrien overshadowed the top 25 during its first year of operation as the merged entity of Potash Corp. of Saskatchewan and Agrium. With a market capitalization of approximately $40 billion, it was almost twice as large as No. 2-ranked Barrick Gold. Still gold remained the most dominant commodity among the top 25, with 21 companies having exposure to the precious metal, up from 19 a year earlier.

Click here to read the full report.  

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SOURCE PwC (PricewaterhouseCoopers)