Canada Unearthed: Which recent mining deals could unlock value for TSX resources investors?

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The Canadian stock market has been a strange place in 2023, with more companies taken private than IPOs this year in a C$12.5 billion splurge from cashed up private equity firms.

In fact just one IPO — Lithium Royalty Corp (TSX:LIRC) — has made it to the main boards of the TSX, with another 12 companies promoted from the junior TSX-V exchange in a collection of raisings picking up just C$114m total.

That has helped soak 1.5% of market cap from the C$3.77t Toronto Stock Exchange, according to Bloomberg.

A number of Canadian explorers operating in fields like lithium and rare earths have also been looking longingly at the risk capital on offer in Australia, with a number chasing secondary listings Down Under.

READ: Canada Unearthed: The Canadians are Coming, the Canadians are Coming

But Canada has been a hotbed of activity for other reasons in 2023, with M&A and consolidation especially in the gold space taking centre stage.

According to GlobalData there were some 121 mining M&A deals announced in Canada in the third quarter of 2023 worth US$3.9b, led by the partial sale of Vale’s base metals business to the Saudis.

That falls shy of the more than 180 deals done in Q1 2023, and well south of the more than US$10b punted on deals in Q3 2021, but a single deal announced this month should see Q4 rival that mark.

The most notable in recent times was, actually, a coal deal, as Teck Resources (TSX:TECK) sold its Elk Valley Resources met coal operations to Glencore and Nippon Steel for a whopping US$9 billion, something that will turn it into a singularly-focused copper and battery metals producer.

But juniors are also getting in on the game, seeking economies of scale by partnering up with fellow Toronto listed companies who can help them expand and access a higher class of investor.

These are some of the M&A actions in the Canadian market that may have gone under your radar.

Nighthawk Gold (TSX:NHK) & Moneta Gold (TSX:ME)

The merged Nighthawk and Moneta will boast a mineral resource of 7.8Moz indicated and 10Moz inferred, with two advanced development assets in the Timmins gold belt of Ontario and Northwest Territories.

Nighthawk boasts the Colomac mine in the Northwest Territories, where gold was first found in 1945 and 500,000oz were produced across the 1990s.

It has sat in the NHK portfolio since 2012, with drilling from the new owner boosting indicated resources to 3.388Moz at 1.5g/t, the bulk of it open pittable, and inferred resources of 1.691Moz at 2.17g/t.

A preliminary economic assessment — similar to a scoping study — suggested the mine could produce 290,000ozpa over an 11.2 year mine life at all in sustaining costs of US$828/oz.

Moneta’s Tower, meanwhile, hosts 4.46Moz of indicated and 8.29Moz of inferred resources and a C$517m capex bill to develop a 260,000ozpa mine with a projected 24-year life and all in sustaining costs in the range of US$1073/oz.

There is little premium baked in, with Moneta’s shareholders to emerge with 66% of the combined company, in line with the relative market caps of the two explorers (C$54m and $105m respectively for NHK and ME).

“We believe that the Transaction presents an exciting opportunity to create a leading gold development company by bringing together two cornerstone assets in Canada,” Nighthawk CEO and Keyvan Salehi and Moneta interim CEO and chairman Josef Vejvoda said in a joint statement on Tuesday.

“The combined company will benefit from a strong balance sheet, led by a skilled leadership team, and a high-quality portfolio anchored by two robust, large-scale assets in established and emerging mining camps.

“We believe that MergeCo offers a truly unique value proposition, and we look forward to working towards unlocking significant value for shareholders of the MergeCo.”

Adventus Mining (TSX-V:ADZN) & Luminex Resources Corp (TSX-V:LR)

$66 million capped Adventus and $35m capped Luminex will combine their El Domo and Condor projects in the emerging copper and gold region of Ecuador in South America.

Luninex’s Condor is located adjacent to Lundin Gold’s impressive Fruta del Norte project, boasting a PEA that anticipates it could be developed into a 12-year mine producing 187,000ozpa with a US$562m NPV at gold prices of US$1760/oz, albeit with a 5% discount rate.

Adventus meanwhile, says it could make a construction decision on El Domo by the first half of next year.

The smaller El Domo would produce 11,000t of copper and 26,000oz of gold along with other metals each year of an initial nine-year mine life, a copper equivalent of 23,000tpa at prices of US$1700/oz gold and US$3.50/lb copper.

Notably, the deal has been backed by Ross Beaty’s Lumina and local Ecuadorian and strategic investors via a US$17.1 million financing arrangement.

Those strategics include C$850 million capped Altius Minerals Corporation and C$30 billion royalty and metals streaming giant Wheaton Precious Metals.

Calibre Mining (TSX:CXB) & Marathon Gold Corporation (TSX:MOZ)

One of the biggest junior mergers globally in recent months, the aim of the Calibre and Marathon tie-up is to create a mid-tier gold miner which could produce upwards of 500,000oz of gold a year from the second half of this decade.

The bigger brother in the deal, Calibre, sold a record 73,241oz of gold at all in sustaining costs of US$1115/oz in the September quarter from a network of mines in Nicaragua and the Pan heap leach asset in Nevada.

It plans to produce 250,000-275,000oz this year at pretty competitive costs of US$1175-1275/oz. Currently gold prices are sitting around US$2000/oz.

In Marathon, where Calibre has already subscribed for a 14.2% stake via a C$40m, 60c per share placement, Calibre will get a foothold in the emerging Newfoundland and Labrador gold district.

But unlike Calibre’s piecemeal Nicaraguan assets, it will also get a single large cornerstone asset, with Marathon’s Valentine mine expected to produce 195,000oz on its own at US$1007/oz over its first 12 years from the start of 2025.

“This Transaction builds on that commitment, adding a high-quality gold asset in the final stages of construction with strong exploration upside in one of the top mining jurisdictions in the world,” Calibre CEO and president Darren Hall said.

“With Calibre’s strong operational expertise and robust cash flow, I am confident that together with the Marathon team, we will continue to meet or beat expectations.

“I look forward to working with the team in Newfoundland & Labrador as they have done an excellent job de-risking, engineering and advancing construction on the Valentine Project.”

For Marathon it’s all about scale and funding, with the Calibre tie-up averting the need for additional debt, royalty or equity raisings.

If goes ahead the deal values Marathon at C$345 million, a 61% premium on a 20-day VWAP basis (as of November 10), with Calibre to hold 66% of the combined entity. At least two-thirds of Marathon shareholders and a basic majority of Calibre shareholders must vote up the deal to get it across the line.

IsoEnergy (TSX-V:ISO) and Consolidated Uranium (TSX-V:CUR)

Uranium is one of the few commodities really capturing the attention of Canadian investors right now, with prices up to 15-year highs of over US$80/lb.

IsoEnergy and Consolidated Uranium’s C$903 million merger is slated to create a global top 10 uranium company, backed by yellowcake majors like Nexgen (ASX:NXG), Energy Fuels and Mega Uranium.

Consolidated Uranium owns — among other assets in the US, Canada and Australia — the Tony M mine in Utah, which boast 6.6Mlb of uranium oxide and was operated as recently as November 2008 by Denison Mines after being originally developed in the 1970s, producing a total of 991,000lb of U3O8 across its two lives.

IsoEnergy meanwhile boasts the Hurricane Zone discovery at Lacrocque East in the eastern Athabasca Basin. Neighbouring ground held by the West’s largest uranium producer Cameco, some of the hits at Hurricane are among the highest grade uranium discoveries globally.

As part of the deal, CUR shareholders will get 0.5 ISO shares for every share they hold, with ISO investors to own 70.5% of the combined entity.

TSX and TSX.V Winners & Losers

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

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