New Canadian rules limit foreign takeovers of mining firms

Analysts predict lower valuations for Canada's top metals producers due to new restrictions on foreign takeovers

New Canadian rules limit foreign takeovers of mining firms

New Canadian rules now limit foreign takeovers of mining companies, resulting in lower valuations for the nation’s biggest metals producers compared to their global peers, say Bank of Nova Scotia’s mining analysts.

BNN Bloomberg reports that Canada will approve foreign takeovers of large domestic mining firms with “significant” critical minerals operations only “in the most exceptional of circumstances,” based on guidance issued Thursday by Industry Minister Francois-Philippe Champagne.

This measure aims to protect Canada’s critical metals vital to the energy transition.

Scotiabank analysts Orest Wowkodaw and Eric Winmill note that the directive “significantly compresses M&A optionality and potentially restricts financing options for Canadian miners.” Consequently, they expect most Canadian miners to trade at lower valuation multiples compared to their global peers.

The directive suggests that large Canadian-headquartered companies such as Cameco Corp., Teck Resources Ltd., Ivanhoe Mines Ltd., and Lundin Mining Corp. are “now off-limits to potential foreign buyers,” according to the analysts.

Other companies affected include First Quantum Minerals Ltd., Hudbay Minerals Inc., Capstone Copper Corp., and Ero Copper Corp.

The S&P/TSX Materials Index, which includes metals producers, fell 1.1 percent 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,” state the analysts, referencing the wave of foreign takeovers 18 years ago that saw the acquisition of some of Canada’s largest metals producers.