Friday, April 21, 2023

Canadian dealmakers expect low-carbon shift will drive mining M&A 

Canadian advisors to mergers and acquisitions (M&A) expect a shift toward low-carbon technologies and government subsidies for them will spur dealmaking in mining for years to come and some are already gearing up for it.

Critical minerals including copper, nickel, lithium, and cobalt – all abundant in Canada – have a big role in the manufacturing of renewable energy systems, especially electric vehicles (EVs), making those miners prime candidates for dealmaking.

“We’re very bullish on the next couple of years in mining,” said Bill Vlaad, a Toronto-based recruiter who specializes in the financial services sector.

Vlaad said his team is adding a new recruiter shortly with a mining and capital markets background. Clients are hiring mining people within dealmaking teams, and boutique M&A advisory firms are adding talent, mostly in mining, he said.

Canada this year expanded an investment tax credit to equipment needed by mining companies – and any other companies in the EV supply chain – to extract or process critical minerals. But companies are already scrambling to scale up.

Mining deals with any Canadian involvement hit $29.5 billion in the first few weeks of the second quarter of this year, the best quarter since the third quarter of 2007, according to data from Refinitiv.

For copper and nickel deals, it was the best quarter on record since at least 1990, the data showed.

Over the past month, Canada’s copper and zinc miner Teck Resources Ltd has rebuffed multiple bids from Glencore Plc, while Canadian Lundin Mining bought a 51% stake in Chile’s Caserones mine for $950 million.

This month, Canadian copper miner Hudbay Minerals Inc announced it was buying peer Copper Mountain Mining Corp in a $439 million deal, and Grid Metals Corp. said it was acquiring additional land in southeast Manitoba, prospective land for nickel and copper.

At the Prospectors and Developers Association of Canada conference in Toronto, one of the biggest mining conferences in the world, investment bankers predicted that deal activity would kick off in companies offering assets like copper, due to the low availability of new mines in the space.

Neil Selfe, founder and CEO at INFOR Financial Group, told Reuters the firm recently shifted about 10% of junior staff away from less active sectors to support mining franchise leaders.

“As we enter what many believe will be a sustained upswing in the resource sector, we believe we are uniquely positioned to help Canadian corporates capitalize on the opportunities that present themselves,” said Deep Khosla, Co-head of Canadian corporate and investment banking at Bank of America.

The bank recently hired Kelsey Scott in Calgary as head of Canadian Energy Investment Banking, promoted Garrett Healey in Toronto to oversee its metals and mining business, and promoted Felipe Rojas to complement their coverage efforts on the corporate banking side.

Bank of America ranked number two for dealmaking in Canada in the first quarter, according to data from Refinitiv.

“Whether the mining sector as a whole is going to be on a tear is something everybody is prepping for,” said a banker at another Canadian lender who was not authorized to speak on the record. “Mining is one of those sectors where you really want to be prepared for the inevitable market pickup.”

(By Maiya Keidan and Divya Rajagopal; Editing by Steve Scherer and Chizu Nomiyama)

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