Canada Unearthed: Share prices rocket as Canuck copper M&A heats up

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• Copper-coal play Teck leads large cap resources winners in Q2 after snubbing ‘unsolicited’ bid from commodities giant Glencore
• Last week’s biggest TSX winner, copper-nickel developer PolyMet, also receives bid from Glencore at huge premium
• Follows rumours of informal takeover approach for First Quantum from Barrick, who is also looking to increase copper exposure

Our Canada Unearthed column wraps the news driving mining and exploration stocks listed in Canada, mostly on the TSX and TSX.V.

Last week we wrote that Canada’s TSXV has turned into “a ghost town of trading” as the small cap exchange continues to suffer from weakening volumes since a February 2021 peak.

AS expected, volume of shares traded on all TMX marketplaces — Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and Montréal Exchange – were down again in June.

All up, vols on the TSX and TSXV plunged 20.1% and 21% in H1 2023, respectively, compared to the same period in 2022.

The value of trades also plummeted 14.5% (TSX) and 35% (TSXV) over the same period.

But there’s a potential positive in the June data. While vols dropped ~2.9% from May to June to 9.6bn shares traded, the value of transactions increased 0.18% to C$221.9bn.

Light at the end of the tunnel?

Miners still on the nose, but M&A action is brewing

Linde Equity says Materials – heavily influenced by commodity price movements — were the worst performing sector on the TSX in the quarter just gone, down 7.1% to reverse Q1 gains.

“A 3% decline in gold prices during Q2 caused Barrick Gold (-11%), Wheaton Precious Metals (-12%), Franco-Nevada (-4%) and Agnico-Eagle Mines (-4%) to rank second through fifth, respectively, among sector detractors in Q2,” Linde says.

A bright light was profitable copper-zinc-coal behemoth Teck Resources (TSX:TECK), which led the sector after snubbing a “low value”, “unrealistic” and “opportunistic” (it’s words) $34bn takeover offer from C$92.16bn capped global mining house Glencore (LON:GLEN).

Teck has a weird dual class share structure, in which ‘A’ class shares are worth a lot more than ‘B’ class shares.

The offer — 7.78 Glencore shares per Teck Class B share, and 12.73 Glencore shares per Teck Class A share — represented a 20% premium at the time of the offer on April 3. Not good enough, Teck says.

“Although Teck rejected the offer, its share price has remained elevated in possible anticipation of further bids,” Linde says.

While Teck’s copper mines were ostensibly the focus, Glencore has since flagged an interest in buying its steelmaking coal division, which was going to be spun out of the business until shareholder vote on the matter was cancelled late April.

Teck reported adjusted earnings before tax of C$2bn in Q1 “driven by strong commodity prices and steelmaking coal sales”.

The company expects to produce up to 445,000t copper, 685,000t zinc and 26Mt steelmaking coal in 2023.

Glencore produced 994,000 tonnes of the red metal in 2022.
 

PolyMet soars 150% on Glencore takeover offer

Glencore has traditionally built its empire through acquisition over discovery.

Last week’s biggest winner, PolyMet (TSX:POM), soared after receiving a takeover offer from Glencore, its main shareholder at 82%.

The US$2.11/sh proposal represents a 167% premium to the last closing price, with Glencore paying ~$71m for the shares it doesn’t already own.

PolyMet, get this, has a 50:50 JV with Teck over the flagship NorthMet and Mesaba copper, nickel, cobalt and platinum group metal (PGM) deposits in Minnesota.

If permitted, the monstrous NorthMet mine would yield 1.2bn pounds of copper, 170Mlb nickel, 1.2Moz palladium, 6.2Mlb cobalt and 400,000oz gold over its 20-year life. It will cost ~US$950m to build.

Copper M&A heating up

Glencore isn’t the only big dog dipping its toe into Canadian copper M&A.

Rumours are that First Quantum Minerals recently rejected an unofficial takeover approach from Barrick, with world’s #2 gold producer, which – like Glencore — is looking to increase its copper exposure.

First Quantum expects to produce up to 840,000t copper, plus 290,000oz gold and 38,000t nickel from its operations in 2023.

“With our brownfield and greenfield projects, the company sees a pathway to 1 million tonnes of annual production, making us one of the world’s top producers of [copper],” the company says.

“We were founded on our belief in the fundamentals of copper and we expect demand for copper will continue to grow.”

TSX and TSX.V Winners & Losers

Here’s how TSX and TSX.V-listed mining and exploration stocks performed last week:

Scroll or swipe to reveal table. Click headings to sort. Best viewed on a laptop.

Stocks missing from this list? Email [email protected]