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M&A

Resources sector to ramp up M&A, says Taurus Funds’ Gordon Galt

The Dalrymple Bay Coal Terminal.

• PAUL GARVEY
• The Australian
• 12:00AM January 16, 2017
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Merger and acquisition activity will ramp up across the resources industry this year, according to the head of one of the most acquisitive local private equity players in the sector.

Taurus Funds Management principal Gordon Galt told The Australian that the growing cash balances within several miners coupled with the ongoing appetite for deals among firms like his had set the scene for more transactions.

Taurus was behind two Queensland coal acquisitions in recent years, buying the Foxleigh mine from Anglo American last year and helping to finance Stanmore Coal’s purchase of Isaac Plains. Taurus is also funding Heemskirk Consolidated’s acquisition and development of the Moberly frac sands project in Canada, and its private equity and funds management arms have also been involved in financing or supporting resource plays including Toro Gold, Tiger Resources, Hummingbird Resources and Lefroy Gold.

“Consolidation is going to be a feature of 2017, without a doubt,” Mr Galt said.

The rebound in most commodity prices over the past year, coupled with the improved operating costs and balance sheets throughout the mining industry, meant many miners were well placed to chase acquisitions.

Mr Galt said many executives believed there was still significant upside in metals prices even after the improvement of the past year.

“People in the copper industry will still regard $US2.50 (per pound) as an ordinary copper price with a lot of upside,” he said. “An investor may not see it that way but the board of the copper company will see it that way. They will have a better feel of the market.”

Taurus expects to be part of that rise in activity, either by pursuing acquisitions of its own or by helping other miners fund their deals.

Mr Galt said the firm had specific commodities in mind, and had not lost its appetite for more coking coal assets despite the sharp retraction in coking coal prices in recent weeks. “We’re still looking for some (coking) coal assets, we’re still looking for gold, we’re still looking for copper,” he said.

The firm won’t be jumping on board the battery materials bandwagon, however.

Lithium and graphite have been two of the liveliest sub-sectors in recent years, thanks to a rise in demand from electric vehicles and other growing battery applications, driving dramatic rises in the prices of companies such as lithium miner Galaxy Resources and graphite play Syrah Resources.

But Mr Galt said the comparatively small size of end markets for lithium and graphite left them prone to extreme volatility. “You might see a shake-out in the lithium and graphite sectors,” he said. “Those markets will say ‘enough’s enough, there’s more projects than there’s going to be demand’, and the first movers will get their opportunities and the rest won’t.”

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