TORONTO - The sharp selloff of Canadian mid-tier base metals miners could lead to a wave of takeovers, with pension funds and foreign private-equity funds seen as potential buyers.

The Toronto Stock Exchange's main S&P/TSX composite index has fallen more than 15 per cent from the high it hit in mid-June, but the drop among Toronto-listed industrial metals miners has been far more severe, as slowing global growth has raised fears that demand could dry up.

Lundin Mining, HudBay Minerals, and FNX Mining, are down 63 per cent, 66 per cent, and 59 per cent from their 2008 highs, while Thompson Creek Metals and Quadra Mining have each fallen a bit less than 50 per cent.

Some are now trading not much above the value of their cash holdings -- HudBay, for example, sports a cash position of $730 million and a market capitalization of $1.1 billion -- despite the fact that most have little or no debt and steady cash flows, even as rising costs have narrowed margins.

Large miners are not immune to the softness in share prices, of course. Earlier this week, Teck Cominco said it would not revise its $13.5-billion offer for Fording Canadian Coal Trust. The deal had been thrown into question by plunging stock prices, although yesterday's recovery could put an end to the speculation.

"I saw one mining company a couple of weeks ago, and they said they can't believe how well the business is going, it's the stock price that's the problem," said David Whetham, a resource fund manager at Scotia Cassels in Toronto. "At these sort of prices, it does become much more attractive for somebody to buy them."

Tight credit has already made smaller firms vulnerable to acquisition. HudBay, for instance, recently acquired Skye Resources for about $420 million for its Guatemalan Fenix nickel project.

But continued pressure on the shares could make the mid-caps targets themselves.

"It's getting to the point where no one's going to be able to source any money," said John Hughes, a mining analyst at Desjardins Securities.

"With that comes no new project development, and therefore companies that have strong balance sheets will ultimately become targets."

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