LatAm mining: Top M&A deals in H1

Latin America’s mining companies advanced M&A deals totaling more than US$2bn in H1, with a strong focus on gold.

At least seven significant transactions concluded or progressed in the period, despite market volatility from the COVID-19 pandemic.

The figure is sharply down from the US$14bn of US$500mn-plus M&As targeting mainly Latin American assets last year, which included the US$10bn Newmont Mining-Goldcorp deal.

Market conditions are seen as favorable for gold-focused M&As, due in part to rising gold prices and a lack of high quality growth projects.

But pandemic-related travel restrictions are currently hampering due diligence. The lifting of restrictions could lead to a surge in deals getting across the line, Scotiabank’s Trevor Turnbull told BNamericas in June.

Franco-Nevada chairman David Harquail agrees.

“There is a pent-up of activity. Once everyone can travel and then host their board meetings, there will be more business announced,” he told S&P Global Market Intelligence.

“Give it 1-2 months after the lifting of travel restrictions."

TOP M&A DEALS

1. Zijin Mining – Continental Gold

Country: Colombia

Metal: Gold

Zijin Mining closed its Cdn$1.4bn (US$1.03bn) takeover of Continental Gold on March 4.

The acquisition gives Zijin control of the US$389mn Buriticá project in Colombia, one of Latin America’s biggest gold assets ramping up to production in 2020.

Buriticá, which is expected to produce 282,000oz/y gold, has been delayed as a result of the COVID-19 pandemic, with Zijin working to implement health protocols.

First production had been due in Q2.

2. Equinox Gold – Leagold Mining

Countries: Mexico, Brazil

Metal: Gold

Equinox Gold and Leagold Mining completed a merger on March 10, with the aim of creating a 1Moz/y gold producing company.

Key Latin America operations held by the merged business – which continues to trade under the Equinox name – include Los Filos in Mexico and Aurizona in Brazil, along with the Santa Luz project in Brazil.

Original 2020 guidance of 615,000-680,000oz gold is expected to be revised in light of COVID-19 disruption.

The deal valued Leagold at around US$584mn.

3. Zijin Mining – Guyana Goldfields

Country: Guyana

Metal: Gold

Zijin emerged victorious in an M&A battle for Guyana Goldfields, Guyana’s leading gold miner.

The company’s Cdn$323mn offer valued Goldfields around 35% higher than a previously accepted bid by Silvercorp Metals.

A rival offer by Gran Colombia Gold – which tied in Guyana-focused junior G2 Goldfields – was rejected.

Zijin aims to boost production from the Aurora gold mine in Guyana, where Goldfields was planning a US$141mn expansion, involving shifting to underground from open pit operations from mid-2021.

Output is expected to average 170,000oz/y in 2022-26, peaking at 211,000oz in 2023.

4. SolGold – Cornerstone Capital Resources

Country: Ecuador

Metals: Copper, gold

Australia-based SolGold formally commenced a bid for Cornerstone on June 30, after expressing interest in acquiring the company in early 2019.

The deal would give SolGold full control over the Alpala copper-gold project in Ecuador, in which Cornerstone currently has a 15% interest, to SolGold’s 85%.

Alpala is the main target in the Cascabel concessions.

Cornerstone’s board has to date rejected SolGold’s advances, and urged shareholders to take no action in connection with the June bid until it makes a formal recommendation.

SolGold said its offer represents a 22% premium over Cornerstone’s June 29 closing price of Cdn$3.19 per share, valuing the company at around Cdn$126mn.

5. Titan Minerals – Core Gold

Country: Ecuador

Metal: Gold

Titan closed its acquisition of Core Gold in May, gaining ownership of Core’s Ecuadoran assets, including Dynasty Goldfield.

Titan’s revised offer, announced in December, of 3.1 Titan shares per Core share valued Core at Cdn$87.3mn, or Cdn$0.523 per Core share.

6. Orocobre – Advantage Lithium

Country: Argentina

Metal: Lithium

Orocobre acquired all issued and outstanding shares of Advantage Lithium in April, taking control of the Cauchari lithium project in Argentina.

The deal valued Advantage at around Cdn$0.42 per share, Orocobre said in February.

Orocobre was Advantage’s biggest shareholder prior to the acquisition, with a 34.7% interest.

7. Argonaut Gold – Alio Gold

Countries: Mexico, US

Metal: Gold

Argonaut closed its at-market merger with Alio Gold on July 1, snapping up the latter’s Florida Canyon mine in the US and Ana Paula gold project in Mexico.

Argonaut also has the El Castillo and La Colorada mines in Mexico, along with other projects in the country and Canada.

The merged business was expected to have an initial combined market cap of Cdn$251mn, Argonaut said in a March presentation, with former Alio shareholders holding a 24% stake, worth around US44.4mn.