“A steady improvement in market conditions should see a gradual return to deal-making in the mining and metals sector,” says a new EY report.
RENO (MINEWEB) – “The mining and metal sector is entering 2014 with a more positive outlook: confidence in the global economy is improving, companies have taken action to deleverage balance sheets and the industry-wide focus on productivity and efficiency should begin to yield results,” says consultancy EY.
In their report, EY mining analysts advised “…we expect the gradual strengthening of mining and metals equity valuations to continue and the increased availability of capital.”
Nevertheless, the analysts cautioned, “As supply and demand struggle to return to post-supercycle equilibrium, we expect further price volatility to occur for at least the next two years. This will see caution prevail: any uplift in M&A activity and improvement of capital raising conditions will be gradual and will require innovation in pricing to tame volatility.”
“We expect growth in M&A activity during the first half of the year to be driven by financial investors and equity-backed alternative capital providers,” they advised. “This growth will not only be driven by anticipated longer term commodity price recovery but also by the application of in-house technical experience to drive operational, technical and financial influence.”
“With low levels of new capital and new investment, the mining sector may well be sowing the seeds for the next boom as supply falls short of demand,” EY suggested.
Nonetheless, last year the mining industry experienced the lowest number of deals since 2007 and the lowest global deal value since 2009, said the report, with the total number of deals down 25% to 702, with a total deal value of $124.7 billion.
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