M&A Gets Nasty As Metals Rebound

One sign metal prices are firmly rebounding has been the resurgence in boardroom battles and hostile takeovers, and their increasingly belligerent tones.

• Up in Quebec’s Ungava region at its partially built Nunavik nickel project, Canadian Royalties is in a tough spot trying to fend off a hostile takeover by Goldbrook Ventures and its Chinese backer Jilin Jien Nickel Industry.

It’s difficult for Canadian Royalties to summon up a rival bid for a nickel project in such a remote and forbidding location, and Nunavik seems to have been largely ignored by the most obvious white knight, mining giant Xstrata, which operates the nearby Raglan nickel mine and apparently has its fill of nickel.

Canadian Royalties’ management and its tightly knit group of shareholders remain open to some kind of partnership with its erstwhile suitors. But the wildcard is “Quebec, Inc.” and whether the Quebec government, through its various financing arms, wants to champion the development of a homegrown nickel miner in a politically important area.

The surest sign that things are headed that way would be the Caisse de Depot converting its Canadian Royalties debentures into shares, which would release the junior from burdensome debt payments as it advances Nunavik.

• A much more personal spat has erupted at Saskatoon, Sask.-based junior Athabasca Potash, where the board turfed its president, CEO and founder Dawn Zhou in late June, effectively saying it needed a leader with a better skill set to further develop its promising Burr potash project in Saskatchewan.

Zhou was instrumental in the company’s initial public offering less than two years ago that raised $43 million when the potash market was hot.

Athabasca found a strong new president in Robert Boyd, former long-time president of Ashton Mining of Canada, which had great technical exploration successes in the diamond sector.

Never one to give up easily, Zhou has launched a counteroffensive and has proposed an alternate slate of directors, to be voted on by shareholders at their annual meeting Sept. 3, just after presstime.

• The attempted removal of the Ulli Rath-led board of Chariot Resources by Lundin Mining chairman Lukas Lundin and director Brian Edgar via a dissident proxy circular has taken on an acrimonious tone, with both sides firing off tartly worded press releases every few days to try to win over shareholders.

Rath is well regarded in the industry and highly experienced in mine development in Peru, having been project co-ordinator for the large Antamina zinc-copper mine project there in the late 1990s.

Rath’s team should win the day at the upcoming shareholder vote, but with Lundin Mining owning 18% of Chariot and having deeper pockets, the dissidents will put up a formidable challenge to the incumbent board.

• It’s disheartening to have your stock double the moment after it’s announced you’re leaving the company. That happened to LuVerne Hogg, who exited his role as long-time president and CEO of industrial mineral miner Zeox, to be replaced by Gerry Spindler as CEO and Michael Shea as CFO. The new crew will now spearhead a possible merger with Imagin Minerals.

• There was some friendly M&A action, too, with Lake Shore Gold and West Timmins Mining teaming up to form a spunky little Timmins-based gold producer and Eldorado scoring a major deal to acquire Sino Gold and further cement its future to the Chinese gold scene.

• GFMS and Socit Gnrale released some new numbers showing a slowdown in de-hedging on the part of gold producers since last year. In Gold Hedge Book Analysis Q2-2009, they found only 980,000 oz. gold (31 tonnes) had been shaved from the global gold hedge book in the second quarter, or a decline of 6% from the first quarter.

The global hedge book ended the period at 14.73 million oz., comprised of 9.93 million oz. in forwards and gold loans and another 4.8 million oz. in options.

The authors found that just a few companies made above-schedule reductions to their positions, including AngloGold Ashanti, Lihir Gold and North Queensland Metals. They also calculated that the marked-to-market liability of the producers’ hedge book contracted slightly to minus US$5.3 billion by mid-2009.

Notable new gold hedging was carried out during the quarter by SilverCrest Mines, Coeur d’Alene Mines and Zijin Mining.