Juniors reap $1bn windfall from big miners’ ‘unloved assets’ – by Paul Garvey (The Australian – October 1, 2014)

http://www.theaustralian.com.au/business

ASSETS unloaded by some of the world’s biggest mining houses for less than $250 million created more than $1 billion in value in months for a handful of junior Australian mining companies.

Data compiled by The Australian shows the recent acquisitions by companies such as Northern Star, Poseidon Nickel and Saracen Minerals have paid for themselves several times over given the share price gains since the deals were ¬announced.

Falling commodity prices and shareholder demands for greater financial discipline have prompted the mining giants to offload non-core assets as part of their efforts to rein in operating costs and reduce debt.

The smaller miners and explorers willing to step in and buy assets in a falling market have been richly rewarded. The Australian’s analysis shows the acquirers enjoyed a surge in market capitalisation that collectively totalled more than $1.3bn at its peak.

While share prices across the sector have fallen in recent months, the combined market capitalisation of the acquirers is still $730.8m higher than their pre-purchase levels.

The acquirers have all comfortably outperformed the ASX 300 Resources Index, which has fallen by 7.2 per cent this year. Late last year, Perth-based junior Cassini Resources agreed to pay BHP Billiton just $250,000 for the large but low-grade Nebo-Babel nickel deposits in Western Australia’s West Musgrave region. The company’s market capitalisation has since grown by almost $20m.

And for the price of a large family home in Perth’s western suburbs, Poseidon Nickel was able to buy two mothballed nickel mines from Russian giant Norilsk Nickel. Poseidon’s market cap has since surged by more than $55m.

Bert Koth, the managing director in Australia for the $US7.9bn ($9bn) Denham Capital private equity fund, said the history of bargain buys would make the mining giants less willing to entertain sales in future.

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