Canada move to limit mining M&A hurts big metals producers, Scotia says
New Canadian rules limiting foreign takeovers of mining companies will leave the nation’s biggest metals producers with lower valuations than their global peers, according to Bank of Nova Scotia’s mining analysts.
Canada will only approve foreign takeovers of large domestic mining firms with “significant” critical minerals operations “in the most exceptional of circumstances,” according to guidance issued Thursday by Industry Minister Francois-Philippe Champagne. The measure was taken to protect the country’s cache of metals that are key to the energy transition.
The directive “significantly compresses M&A optionality and potentially restricts financing options for Canadian miners,” Scotiabank analysts Orest Wowkodaw and Eric Winmill said in a Monday note. “As a result, we now anticipate most Canadian miners to trade at lower valuation multiples versus global peers.”
The new directive suggests that large Canadian-headquartered companies including Cameco, Teck Resources, Ivanhoe Mines and Lundin Mining “are now off-limits to potential foreign buyers,” the analysts wrote. Other companies named were First Quantum Minerals Ltd., Hudbay Minerals, Capstone Copper and Ero Copper.
The S&P/TSX Materials Index, which includes metals producers, fell 1.1% Monday, with most of the companies named by Scotiabank’s analysts leading the decline.
“This is clearly designed to prevent the same fate experienced by the last generation of large Canadian miners, namely Alcan, Falconbridge-Noranda, and Inco,” they wrote, referring to the flurry of foreign takeovers 18 years ago that took out some of Canada’s biggest metals producers of the day.
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