Ladies / gents:

...here's another good article from the "Mining" supplement in last week's "Business In Vancouver" magazine (pages 21-22; 30 April 2013 edition).

Gavin Dirom, president and CEO, Association for Mineral Exploration British Columbia: low share prices and an improving economy have created a “buyers market” for mining M&A activity | Dominic Schaefer

By James Dolan Tue Apr 30, 2013 12:01am PST

* * * * * * *

When it comes to mergers and acquisitions, B.C.'s mining industry is hoping the future looks brighter than the recent past, according to Bruce Sprague, Canadian mining and metals sector leader at Ernst & Young LLP.

"Clearly, raising capital was a challenge for the junior sector [in 2012]," Sprague noted. "Similarly, in some instances, the majors did deals [between] 2008 and 2012 – there's been a lot of press about the size of those deals and some of the related impairment charges that have been booked. Hopefully there are better times ahead for the sector."

Sprague's upbeat outlook is explained in greater detail in Ernst & Young's recent report Mergers, acquisitions and capital raising in mining and metals: 2012 trends 2013 outlook. In it, Sprague and his colleagues provide an in-depth analysis of expected global M&A activity in the coming year, detailed by country and commodity.

Going forward, Sprague envisions a "two-tier" scenario for many of B.C.'s junior mining companies.

"You're going to have situations where you have the 'haves' and the 'have-nots,'" he said. "There will be some juniors that will be in a fortunate position as they enter 2013, where perhaps as a result of strong management teams, [or] prudent or opportunistic financing in 2012, they're in a reasonable cash position.

"You're going to see some consolidation in the junior sector, where you're going to get 'good property no cash' with 'decent property and cash' – you bring the two together."

On the other side of the market, Sprague sees senior mining and metals companies taking a more cautious approach to M&A activity. "Three or four years ago they might just go out and buy a junior, buy a mid-tier company and proceed on that basis. Likely what you're going to see is them taking a minority interest position in the junior company."

Sprague says the strategy falls into the continuing theme of "portfolio rationalization" among senior producers, in which executives carefully evaluate whether divestiture, joint ventures or further financing make more sense than seeing a property through to development.

"What the majors are doing is they're stepping back," he said. "It's a stop and pause – a kind of review [of] the portfolio before [they] make that next step."

While Sprague acknowledges that the outlook for the global economy remains cloudy (he identified the continuing fiscal crisis in the European Union as a big unknown), he believes top-tier mining companies will continue to look to B.C. to boost their project pipelines.

"Certainly in the discussions we've had with some of the [potential] foreign acquirers, there continues to be a fairly healthy appetite for gold and copper. Coal is another commodity of interest as well," he said. "Provided there's still that healthy appetite for commodities, [majors] will continue to look to grow and to develop."

Gavin Dirom, president and CEO of the Association for Mineral Exploration British Columbia, agrees that the current economic climate presents a compelling buying opportunity for acquisition-minded mining companies.

"Stock prices are trading at significant discounts – they're way off their highs," Dirom noted. "If you're an optimist [and believe] that the recovery is happening and the demand will be there and the prices will reflect that, this is a merger and acquisitions opportunity in 2013."

As Dirom explained, this should be good news for the province's mining sector.

"B.C.'s going to fare very well over all, given our position and our connection to the Asian markets, and we have the commodities that are in demand," Dirom said.

Both Sprague and Dirom agree that B.C. enjoys a reputation within the mining industry as a good place to do M&A.

"[In B.C.], there's a progressive attitude toward encouraging the prudent growth of the sector. A lot of leading practices [come] out of British Columbia," Sprague said.

"Within the eight-block radius of downtown [Vancouver], there are a lot of people who know a whole lot about the mining sector. And similarly, you've got great industry associations in B.C., that are very focused on the prosperity of the mining industry in B.C."

"I think there's significant expertise in B.C. with respect to M&A and new exploration," Dirom said. "Really, we're the centre of new exploration in the world, so we know it very well."