A takeover bid for FTSE 250 gold miner Centamin PLC (LON:CEY) by Canadian group Endeavour Mining Corp (TSE:EDV) (OTCMKTS:EDVMF) could open the door to a potential rescue of troubled potash miner Sirius Minerals PLC (LON:SXX), according to finnCap analyst Martin Potts.
Speaking to Proactive, Potts said it was “almost inevitable” that the Yorkshire-based firm will be taken over “at a huge discount” following the failure of a US$500mln fundraising in August which has seen the shares plummet 76% to 3.5p since then.
Potts says the acquirer is likely to be a Chinese player as they will be in most need of the fertiliser potential of Sirius potash resource and will “do what it takes to get those units mined”.
Talk of a cut-price takeover of Sirius forms part of a trend among Londons listed miners as the weaker pound has left a lot of UK firms in the space looking decidedly cheaper for foreign buyers.
Centamin is one such example, with a series of disappointing production figures over the year having depressed the share price by around 26% to 112p from a yearly high of 152p in late August, a factor that some analysts think was a likely factor in the timing of Endeavours approach.
Funding crises and asset chasing
The potential for a Sirius buyout is reflected lower down among the sectors juniors, which could be facing renewed acquisition interest as part of a funding crisis in new project exploration.
Money that used to go toward small cap miners has in recent years been diverted towards new speculative plays such as cryptocurrency and cannabis, which many private investors now see as more attractive than exploratory mining projects.
However, this lack of investor funding means larger players in the mining sector are now going asset chasing.
“[The funding crisis] has led to a massive reduction in exploration spend,” Potts says, however, as the need for new resources becomes more acute, he expects big-cap miners to take a more serious interest in the potential of smaller firms.
“With the reduction in exploration the good assets are going to be more keenly fought over”, he adds.
Signs of this trend already seem to be appearing, with blue-chip miner Read More – Source