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TORONTO (miningweekly.com) – Despite 2013 being one of the worst years for mergers and acquisitions (M&A) in recent history, mining activity was expected to rise in the coming months with developed economies beginning to stabilise and miners looking to add assets in a strategic manner, professional services firm PwC’s latest ‘Global Mining Deals’ report has found.
With the volume of deals last year falling to its lowest level since 2005, miners were expected to continue to move away from diversification and focus on core assets and commodities.
PwC global mining leader and Canadian mining leader John Gravelle said that many companies interested in buying were looking at similar commodities in familiar regions, where they were already operating.
“Overall, the mining sector has experienced short-term pain for what could be longer-term gain. To once again create shareholder value and extend mine life, miners will need to continue to acquire assets,” he said. The top five deals last year pointed to the changing nature of M&A in the current environment.
According to the report, instead of outright takeovers, companies were buying and selling smaller portions, which was what led to the drop in overall deal value in 2013.
PwC said that it expected many mining executives to complete joint ventures in strategic assets, as opposed to assuming all the deal risk associated with financing the development on their own. A current example of this was global miner BHP Billiton announcing its interest in finding a partner for its Jansen potash project, in Saskatchewan.
Despite many mining majors being expected to remain sellers of assets, more midtier companies would be active buyers in 2014. A few midtiers had indeed indicated they were ready to make acquisitions, while others had announced their intention to consider strategic options.
Meanwhile, junior mining companies were expected to become more active with M&A this year. Many would need to sell or merge with another company to stay afloat.
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