First Mining Finance sees more acquisition opportunities after three-way deal
Canadian mining heavyweight Keith Neumeyer is taking advantage of awful market conditions to snap up promising assets left and right.
First Mining Finance Corp., Neumeyer’s “mineral bank,” unveiled a three-way deal this week in which it will buy Gold Canyon Resources Inc. and PC Gold Inc. for a total of about $66 million in stock. This comes less than two months after First Mining acquired Coastal Gold Corp., its first acquisition.
Vancouver-based First Mining only went public in April, but the company sees this as the ideal time to buy junior mining assets on the cheap. Juniors are suffering through their worst bear market since the Bre-X crisis because of sinking commodity prices and a near-total lack of financing options.
“We don’t want the market to turn around soon, because we really want to load up on assets,” Pat Donnelly, First Mining’s president, said in an interview.
“And so the longer this bear market continues, the better for us.”
Neumeyer, First Mining’s chairman and founder, also founded First Quantum Minerals Ltd. and First Majestic Silver Corp. during poor markets, and those companies went on to have tremendous success. However, his strategy is very different this time around.
Rather than build another mining company, the idea with First Mining is to buy assets while prices are low and hold onto them. When market conditions do turn around, the company plans to strike deals with third parties that would move the projects into production. First Mining would maintain an interest in the properties, possibly through royalties or joint ventures.
“We don’t want to operate or build mines. We simply want to acquire assets and wait for better market conditions,” Donnelly said.
He noted that other companies have done similar things. For example, well-known entrepreneur Ross Beaty acquired a big portfolio of copper assets when metal prices were low in the early 2000s, and later sold them for big premiums after prices soared.
But Donnelly thinks the opportunity today is even better than it was then. Beaty bought assets that needed much higher commodity prices to make economic sense. Donnelly said First Mining is looking at projects that would be profitable at current gold prices if they were in production. He hopes to acquire more assets in the months ahead.
There has been increased M&A in the Canadian junior mining space in recent months. Investors hope to see many more deals in the weeks and months ahead, as there are far too many single-asset companies with minimal cash and no real ability to move their projects forward.
Gold Canyon and PC Gold’s flagship assets are both in northwestern Ontario.