BMO digs deeper in mining during a ‘transition’ year for bank

BMO Capital Markets’ metals and mining division faced upheaval this year after losing its two veteran co-heads during an already tough time for the resource industry. Its new leaders aim to prove the investment bank remains as strong as ever in the sector.

The Bank of Montreal unit is accelerating lending and adding more bankers, including a sales-and-trading team poached from Bank of Nova Scotia, to continue competing in the beleaguered resource sector, according to Ilan Bahar and Jamie Rogers, the new co-heads of global metals and mining at BMO Capital Markets.

“It was a year of transition,” Bahar said in an interview. “We’ve had a great year throughout this transition year and we found ways to invest.”

Bahar and Rogers expanded the business after succeeding Egizio Bianchini and Jason Neal, who left early in the year. Rivals were unable to to capitalize on the shakeup, even amid weakness in the market, Rogers said.

“It was hopeful noise coming from many of our competitors that they could expose that flank on us,” Rogers said. “We’ve proven them wrong this year and expect to continue to prove them wrong next year.”

Prices hurt

An economic slowdown in China, the world’s biggest commodity consumer, along with trade tensions and a strong U.S. dollar drove down prices of industrial metals this year, while gold also was hurt by the dollar’s gain. Still, prospects are strong for most metals as supplies shrink and mining investments stagnate. Deals are still getting done, allowing investment banks to collect fees for advising on takeovers and arranging financing.

BMO Capital Markets has more than 100 people involved in metals and mining, the most among Canada’s bank-owned firms, and the addition of three corporate bankers since 2017 helped increase lending to companies in the industry to more than C$10 billion ($7.5 billion).

“Our lending commitments to the metals and mining sector at BMO have doubled over the last five years, and a lot of that has really been in the last couple years,” Bahar said. 

The latest priority at BMO Capital Markets, the largest of Canada’s investment banks, has been building up a metals sales and trading business to complement the firm’s strength in investment banking.

BMO also advised on more mining deals than any other investment bank this year, with the firm involved in 19 announced acquisitions, including guiding Nevsun Resources Ltd. on its proposed $1.41 billion takeover by Zijin Mining Group Co. The investment bank’s average deal size and total value of transactions were smaller, however, than firms such as Canadian Imperial Bank of Commerce and Morgan Stanley.

Worldwide, there were 1,349 announced mining deals valued at $86.3 billion this year through Dec. 18, up 60 percent from last year but a far cry from the $149 billion in 2012, the last big year before an industry downturn, data compiled by Bloomberg show. Mining takeovers involving Canadian companies were valued at $16.6 billion this year, with the biggest being Barrick Gold Corp.’s planned $5.4 billion takeover of Randgold Resources Ltd.

New BMO Capital Markets employees include Frank Xu, who oversees the firm’s investment-banking business in China from Beijing. He was hired in October from Barclays Plc, where he spent almost a decade covering Chinese metals-and-mining and energy companies. Closer to home, the firm hired base-metals equity analyst Jackie Przybylowski, who joined last month in Toronto.

To that end, it hired seven employees for metals sales and trading, including Bimal Das, more than doubling that business to a dozen people. Das, a managing director in New York, oversees the group’s sales and structuring effort. Other New York additions included Russell Browne, Harry Lampart and Alfred Ghosh for sales, along with John Fox and Anuj Kakar for metals trading. Tomas Gargantini, who’s in sales, joined in Toronto.

All came from Scotiabank and its ScotiaMocatta division, a metals-trading business with a history tracing back to 1671 that the company scaled back this year after reviewing the operation.

Accelerated growth

“It has been our objective over the last little while to expand our efforts in this business, to grow it and be as relevant to us as the investment-banking side,” said Paul Rosica, BMO’s head of corporate sales and structuring. “This presented itself as an opportunity for us to really accelerate our growth plans.”

The firm plans more hiring outside North America in coming months, with one or two people each in London and Hong Kong, Rosica said, adding that he expects to double the business in the long term. BMO’s hiring and investments reflect a sense of improvement after what Rogers described as a “difficult” year for the market.

“Some of the headwinds that have faced gold over the course of 2018 might start to turn,” Rogers said. “Most believe that the fundamentals for many of the base metals remain very strong over the near and longer term.”

(By Doug Alexander)

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