Appetites wane

Nobody actually said it would be easy. But they sure implied that consolidating the mining industry was a bit of a downhill run.

It’s proving to be no such thing. One of the most logical of all the mergers — Aur Resources with Inmet Mining — has now run onto the rocks when most people were predicting fairly smooth sailing.

The two companies, which together typified the middle tier of Canadian base metal producers, are withdrawing from their merger agreement by mutual consent. Short statements from both said that there had been no issues, either technical or financial, that arose out of their due-diligence investigations before the merger.

What, then, brought it down? One factor could be that good old intangible, “corporate culture,” which gets raised up whenever a merger proves unsuccessful. Perhaps Aur and Inmet looked at each other, saw something that wouldn’t work, and decided to save themselves the trouble. Or perhaps what each one saw was too much like itself, and two historically aggressive and enterprising companies saw conflict coming. Maybe it was just that James Gill couldn’t quite see himself as a non-executive chairman.

The other possibility is that there are deals now floating around that haven’t become public knowledge yet. Aur and Inmet may be unusually well-positioned to take on assets that others might be ready to sell, or might have the sense that something better awaits.

Something better doesn’t always await, though, and that brings us to another merger proposal — the one between Iamgold and Wheaton River Minerals, which went straight off the road and into the swamp. We can’t fairly put all the blame on the original deal, though it’s clear that many shareholders were hoping for something more lucrative. Instead, let’s concentrate on the events that messed up the plan.

Iamgold and Wheaton now plan to hold shareholder meetings on July 6, a month later than originally scheduled. That delay was forced on Iamgold by the courts so that shareholders could consider a bid from Golden Star Resources. Pressure on Wheaton to hold a second vote, to allow its shareholders to consider a bid from Coeur d’Alene Mines, forced Wheaton to do the same.

Leaving aside the usual noises each party makes about how its deal is “clearly superior” to the other, what strikes us is how the hostile bids really didn’t look much better than the management-brokered merger. You’d be forgiven for thinking that these were half-hearted attempts to keep the bidders in the game, rather than serious commercial offers.

Now add the last-minute timing of the Coeur and Golden Star bids, which came out only a week before proxies for the Iamgold and Wheaton meetings were due for submission. It was the tight timing between the new offers and the shareholder meetings that forced Iamgold to delay its meeting and Wheaton to throw out its first vote.

If Coeur and Golden Star were ready to make serious offers, why did they wait that long to unveil them? It suggests to us either that these are weak bids, which took a long time to assemble, or that they are just a way of derailing the earlier deal in the hope that someone, anyone, will nail together a package that includes the bidders as well.

Consolidation isn’t simply a matter of making a deal and printing some new share certificates. Deals are easy. Good deals are infinitely harder.