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A refiner pours bars of gold at Agnico-Eagle's Meadowbank mine facility in Meadowbank Mine, Nunavut on Wednesday, August 24, 2011. The mine is situated 75 kilometres north of the hamlet of Baker Lake.Sean Kilpatrick/The Canadian Press

Growth is no longer a dirty word for mining companies. After three hard years of begging for capital, killing projects and shrinking portfolios, miners are getting ready to grow again.

But that does not mean a return to multibillion-dollar deals in the sector. Mergers and acquisitions will likely be small this year. Miners are terrified of making a false move after they were punished for blowing out their balance sheets with big acquisitions during the commodities boom.

"People want to be seen to be doing smarter deals rather than just big deals," said Michael Faralla, head of global mining at Toronto-Dominion Bank. "They want to do it in a way that avoids the exuberance of the last cycle, which led them to do deals that hurt shareholder value."

Goldcorp Inc. is looking for partners to share the burden of building mines. Barrick Gold Corp. is studying whether it makes sense to dig an underground mine at its suspended Pascua Lama gold project in South America.

The cautious moves will likely mean less work for Canadian investment banks, which were involved in the industry's drastic overhaul by underwriting share offerings, selling and buying assets and working on mining financing deals in which companies buy future streams of production.

Mining companies "can reduce their debt levels. The need for them to sell assets, do streaming transactions is not the same as it was a year ago," said Peter Collibee, head of mining investment banking at Bank of Nova Scotia.

Canadian investment banks benefited from the surge in stock offerings and financing deals last year. Mining financiers Franco-Nevada Corp. and Silver Wheaton Corp. collectively raised more than $1-billion (U.S.) from public markets and then funded deals with major companies such as Swiss-based Glencore PLC and Brazil's Vale SA.

Globally, there were 1,598 mining deals worth $95.9-billion in 2016, compared with 1,537 worth $122.7-billion in the previous year, according to Thomson Reuters data.

Last year's bounce in metal and mineral prices helped revive companies' stock and performance. Mines are now generating cash and those funds are being used to pay down debt.

And as the need for cash eases, share offerings and asset sales are not expected to continue at the same pace.

Mine sales that were announced with great fanfare have been shelved. London-based Anglo American PLC recently reversed divestment plans after putting dozens of mines and projects on the chopping block.

It's a similar story with Barrick. The world's largest gold miner ran a very public process to get rid of its stake in an Australian mine – though after its top bidder ran into problems, Barrick said it was "happy" to keep the stake if the price was too low.

The only real reason to merge or acquire assets is to replenish metal stockpiles, which is a looming problem for the gold sector.

"A lack of investment has created an environment where there hasn't been a lot of discoveries," said Chris Gratias, head of mining investment banking at Canadian Imperial Bank of Commerce.

But many mining companies do not have to buy assets. Miners who put their projects on hold during the commodities slump can now resuscitate them. Some already have. Kinross Gold Corp. is going ahead with an expansion of its gold mine in West Africa. Rio Tinto's Iron Ore Company of Canada announced it would expand iron-ore operations in Labrador. Agnico Eagle Mines Ltd. said it would spend upward of $1.2-billion to build gold mines in northern Canada.

Not only are miners hesitant to pull the trigger, there is no real pressure to expand this year. Investors and companies care more about profitability than size.

"These companies are in far better condition," Mr. Collibee said. "They don't have to act at all in short to medium term. In the longer term … they need to continue to develop or acquire new projects to be sustainable, but there is absolutely no urgency to do this."

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 3:57pm EDT.

SymbolName% changeLast
FNV-T
Franco-Nevada Corp
+1.43%161.4
BNS-T
Bank of Nova Scotia
+0.94%70.07
BNS-N
Bank of Nova Scotia
+1.21%51.78
ABX-T
Barrick Gold Corp
+2.46%22.53
G-T
Augusta Gold Corp
+6.93%1.08
TD-T
Toronto-Dominion Bank
-0.63%81.75
TD-N
Toronto Dominion Bank
-0.43%60.38

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