Editorial: Lordy, have we hit bottom yet?

The final week of September saw wave after wave of selling pressure across a wide range of commodities.

• As any commodity investor is painfully aware, the ongoing sovereign-debt crisis in Europe and the threat of another recession in the U.S. have resulted in a sharp correction in commodities prices in September.

Dr. Copper is trading at just US$3.11 per lb. at presstime after having started out September at US$4. Nickel is at US$8.40 per lb., down from just under US$10 in early September. Lead’s at US$0.89 compared to US$1.10 a month ago, aluminum has fallen to US$0.97 per lb. from US$1.10 and zinc’s slipped to US$0.84 per lb. from a buck.

The precious metals subsector is equally bleak, with spot gold prices trading below US$1,600 per oz. at presstime, down from the US$1,900 mark at the start of September. Over the same period, silver fell to US$30.29 per oz. from US$43.25, platinum slumped to US$1,484 per oz. from US$1,885 and palladium was knocked all the way down to US$549 per oz. from US$776.

Even the diamond market is weakening, with the Rapaport Group’s polished diamond-price index for a 1-carat stone dropping 4.5% in September, and 8.6% in the third quarter. 

As a result of all this price gloom, almost half the mining stocks we track on North American stock exchanges recorded new 52-week lows during September’s closing week.

• There have been a couple of significant mergers in the mining-suppliers sphere.

Two top-tier law firms specializing in mining and energy, Macleod Dixon and the Canadian arm of the Norton Rose Group, are joining forces to create Norton Rose Canada.

The merged company will be born on Jan. 1, 2012, and will boast nearly 700 lawyers based in Calgary, Montreal, Ottawa, Toronto, Quebec City, Caracas and Bogota. That will place Norton Rose Canada among the top three Canadian legal practices.

Norton Rose Canada will be a part of the U.K.-based Norton Rose Group, which itself will rank as one of the five largest international legal practices by number of lawyers, with more than 2,900 lawyers in 43 offices worldwide.

Norton Rose entered Canada with a splash in November
2010 through its merger with the venerable Montreal-based
law firm Ogilvy Renault in a deal that was only consummated
in June.

Macleod Dixon, meanwhile, has near-100-year-old roots in Calgary and is highly regarded in the oil patch. Its offices in Caracas and Bogota will be Norton Rose’s first in the region.

John Coleman will continue as the managing partner of Norton Rose Canada’s enlarged Canadian operations. Macleod Dixon’s managing partner Bill Tuer will join the executive committees of Norton Rose Canada and the Norton Rose Group.

On the more muscular end of the mining supplier spectrum, Major Drilling Group International wrapped up its acquisition of smaller, fellow drilling company the Bradley Group, of Rouyn-Noranda, Que.

Major Drilling paid Bradley’s owners $72 million on closing, with another $8 million due over the next three years.

Major Drilling has added Bradley Group’s 124 rigs to its base of 577 rigs. Strategically, Major Drilling notes that it will be taking on Bradley’s greater emphasis on central Canada and the gold industry, and the addition of Bradley Group’s rigs – 80% of which are surface drilling rigs and the rest underground diamond drilling rigs – furthers Major Drilling’s focus on specialized drilling.

The purchase brings on-board Bradley Group’s 860-employee workforce, its management team and existing contracts in Canada, the Philippines, Colombia, Mexico and Suriname. Based in Moncton, N.B., Major Drilling now boasts a total fleet of 701 rigs and 5,220 employees.

To pay for the deal, Major Drilling has completed a bought-deal financing with a syndicate of underwriters led by TD Securities, and has issued 5.9 million shares at $11.90 apiece, for gross proceeds of $70 million. There’s also an over-allotment option that could bring another $10.5 million. At the same time Major Drilling refreshed $100 million in credit lines with the Bank of Nova Scotia and TD Bank.