April 27, 2015
New York partners Fredric Sosnick (Financial Restructuring & Insolvency) and Cynthia Urda Kassis (co-head, Mining & Metals Group) co-authored an article, titled “Gold or Fool’s Gold?,” published by Mining Journal.
The authors note that continuing significant liquidity constraints in traditional sources of mining sector funding, combined with depressed commodity prices, have caused major and mid-tier mining companies to sell “non-core” assets, and juniors to either sell themselves or enter into insolvency proceedings. Although this current environment provides an opportunity for bargain acquisitions, the authors caution that investors must be aware of the unique characteristics of mining companies and their assets that can affect their value and inhibit flexibility in a restructuring. “To ensure a transaction concludes with the acquisition of gold and not fool’s gold,” they say, “it is critical to carefully diligence both the age-old fundamentals of the mining business … as well as the impact of newer developments such as alternative sources of finance and traditional and exotic hedging products.”