Canadian Lawyer InHouse

35 CANADIANLAWYERMAG.COM/INHOUSE MAY 2016 I n d u s t r y S p o t l i g h t acquisition is subject to a number of condi- tions, including receipt of regulatory approv- als, according to Norton Rose. Greenfi eld says that, currently, buyers and sellers have wildly different views on how much assets are worth. "Sellers aren't pre- pared to sell on those assumptions because they see some light at the end of the tunnel, so there's a gulf between what the seller and buyers think assets are worth," he says. Sébastien Vézina, mergers and acquisi- tions partner at Lavery de Billy LLP, says buyers who purchase non-performing assets in the natural resources sector, and especial- ly in oil, will do so with a long-term vision. "Commentators are saying . . . the lower oil prices will not be a situation we're going to be facing for 10 years or fi ve years. We're talking about years, but we're talking about one or two years. Some people are saying the end of 2017 we're going to be getting out of this," Vézina says. "So when you think about it, being very reasonable, 24 months is not a long period of time." According to Vézina, it's easier to more accurately predict the future potential of purchased assets in oil and gas as opposed to mining, where there is less consensus around when commodity prices will recover. Still, there have been some transactions in mining lately. In Quebec, Agnico Eagle Mines Limited and Yamana Gold Inc. re- cently acquired all issued and outstanding common shares of Osisko Mining Corpo- ration. In December, Champion Iron Lim- ited announced that its subsidiary Québec Iron Ore Inc. entered into an asset purchase agreement to acquire Bloom Lake Mine and related rail assets. In a press release issued at the time, Champion said it was confi dent about the potential of the Bloom Lake assets. "Champion believes there is capacity to reduce the care and maintenance costs at the Bloom Lake Mine, which would reduce the overall required capital. Discussions with leading commodities traders have also confi rmed off-take interest with the back- ing of steel mills, to the extent that Cham- pion has confi dence that future Bloom Lake production could be pre-sold," the company said. "Additionally, discussions with strate- gic partners, funds, government agencies, and private investors are at an advanced stage for the company to obtain additional fi nancing in order to secure up to 24 months of care and maintenance should low iron ore prices prevail during this period." In some ways, the mining sector is a bit ahead of the oil and gas sector in terms of transactions, according to Crae Garrett, partner in the Calgary offi ce at Norton Rose Fulbright LLP. Mining is seeing the same downward pressures hitting base commodi- ties, Garrett says, and there have been sig- nifi cant sell-offs of non-performing assets. "During the boom time in precious met- als, and in fact during the boom time in base metal, a lot of gold companies in particu- lar let their balance sheets get carried away with themselves." If they're going to rectify that, there's going to be "a lot of asset shad- ing going on," Garrett says, adding, "It's not a bad indication of the kind of activity we might start to see in the oil and gas sector." However, in Vancouver, Robin Longe, business partner at Bull Housser & Tupper LLP, is less optimistic about transactions in the mining sector. "The junior companies that aren't able to hold on to their assets — they'd want to sell them, but they also have to have a willing buyer, and the problem is that the major companies are not in a great cash fl ow position and are reluctant to spend money on assets that aren't already proven or in production," Longe says. 'That's the issue — the juniors typically [have] assets that are in the preliminary stage of development that still need to be proven," he says, adding there might be transactions between two willing partners, but things will be slow until the market turns around. Amid all the gloom in the natural re- sources sector, there's been a ray of sunshine in forestry. The weaker loonie has meant in- creased selling of Canadian wood south of the border. "Forestry has had market pres- sures throughout what was the commodi- ties' pretty signifi cant boom time, so I think the forestry sector is much more savvy at dealing with market disruption in general. It's good at dealing with it because all of the forestry organizations that weren't good at it no longer exist. It's kind of an evolution- ary thing," Garrett says. As occurred during the economic down- turn in 2009, the least effi cient of players in mining "become the fi rst casualties," Gar- rett adds. "When the dust settles, the peo- ple that know their stuff are the people that survive. If you do that cycle a few times, you get people who really understand their sec- tor and have really adapted." IH I think because equity markets don't present a number of options for companies, one of the ways that they're going to raise the necessary capital is going to include the sale of upstream and midstream assets. WAYNE FEDUN, Norton Rose Fulbright LLP

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