New Gold to buy Bayfield; Scorpio and US Silver & Gold to merge

Mon Nov 10, 2014 10:44am EST
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By Euan Rocha

TORONTO Nov 10 (Reuters) - The precious metals sector in Canada, which has been battered by the plunge in gold and silver prices, received a small spot of positive news on Monday, with the announcement of two separate M&A deals.

Investment bankers and industry insiders believe more such deals will be needed for miners, whose share prices have dropped in recent months, to ride out the extended slump.

Vancouver, British Columbia-based New Gold said on Monday it planned to buy exploration company Bayfield Ventures Corp for C$16.6 million to expand its land holdings in the Rainy River mining district in northwestern Ontario.

Separately late on Friday, two silver miners Scorpio Mining and U.S. Silver & Gold also announced plans to merge, creating a C$65 million ($57.5 million) combined entity with a bigger portfolio of silver assets in the Americas.

The deals at values substantially below historical highs reflect the challenges facing the sector, as gold prices have dropped over 30 percent, and silver has plunged more than 50 percent over the last two years.

Bankers and industry executives say the tough market is likely to compel miners to consider merging and striking deals at previously untenable levels in order to survive.

To win investor support for such deals, bankers and lawyers contend most are likely to be in the form of equity rather than cash to give shareholders the possibility of future upside, if and when precious metal prices begin to rebound.

Both the New Gold-Bayfield and Scorpio-U.S. Silver & Gold deals are equity-based.   Continued...