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Strategic investment transactions create benefits for mining companies

Author(s): Alan Hutchison, James R. Brown

Dec 18, 2018

One of the most significant trends in the mining industry in 2018 was the emergence of strategic investment transactions. Access to capital was a particular problem for junior exploration companies, as the capital markets were reluctant to take on exploration or development risk with their investments in the face of broader market uncertainty. At the same time, major mining companies were reviewing their mineral reserve/resource portfolios and project pipelines after almost a decade of fiscal restraint. This led to a number of strategic investment transactions involving major companies acquiring significant minority equity stakes (5% to 19.9%) in junior exploration companies. These transactions represent a win-win outcome for both parties as junior companies receive much-needed financing and major companies are positioned for future opportunities on potentially accretive projects.

Factors for successful strategic investments

The primary motivation of major companies for pursuing strategic investments is to gain exposure to a compelling project in a transaction that is less risky than an outright purchase...

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