Source: Financial Post - Crosbie

In the Gold Sector, 49 deals were completed in 2009 for a total value of $5.9 billion. Although the total value of transactions was significantly lower than both 2007 and 2008, the number of deals increased substantially. This is evidence of fewer large-cap mergers and more small companies making modest acquisitions to increase their critical mass.

Notable deals in 2009 were Eldorado Gold’s acquisition of Sino Gold Mining Limited in a transaction valued at $1.5 billion, and Lake Shore Gold Corp. and West Timmins Mining Inc. merger to form a much larger entity in the Timmins gold camp.

In terms of M&A multiples in 2009 based on a selection of deals, companies paid an average of $89 per ounce of gold for producing assets and $29 per ounce of gold for exploration assets. The decrease in price from 2009 could be a reflection of some deals being done at lower valuations due to adverse market conditions.  

The Metals and Mining Sector had a total of 88 deals done in 2009 for a total transaction value of only $7.1 billion, an enormous drop off from 2007 and 2008. Even though base metals prices have rebounded from their lows, most base metals mining companies are still trading well below their peaks in 2008.

Some notable deals in 2009 included Consolidated Thompson Iron Mines, announcing in March 2009 that Wuhan Iron and Steel Corp (WISCO) agreed to make a $240 million investment in the company for a 19.9% stake. As part of the deal, WISCO will be entitled to other long-term off take rights at fair market value from both initial production and future expansion. This deal continues the trend of Chinese companies securing hard assets around the world to secure supply over the long term.

In October 2009, Noront made an unsolicited all-share bid for Freewest Resources in an attempt to begin consolidation of the chromite discoveries in the Ring of Fire. Cliffs Natural Resources proceeded to outbid Noront, eventually winning Freewest on its third bid. Cliffs stated that they would put Freewest’s chromite properties into production by 2015, building the infrastructure necessary to access the Ring of Fire, and building a furnace to refine the ore into ferrochrome at a substantial capital cost. Most of the world’s chromite resources and ferrochrome production is located in countries such as South Africa and Zimbabwe, making a high grade deposit in Ontario very attractive because of its political stability and the availability of cheap power for a ferrochrome furnace in Thunder Bay.