Australian mining deals are expected to rebound from a more than 12-year low this year as confidence grows that the worst of the commodities downturn is over and as the big miners continue to hone their portfolios through sales and purchases.
Mining mergers and acquisitions involving Australian companies fell by $2 billion to just $6.9bn last year, according to analysis of Bloomberg M&A data by The Australian. This was the lowest in at least 12 years and less than a 10th of the $71.9bn worth of deals struck by Australian miners and their grateful investment bankers and lawyers in the boom year of 2007, when Rio Tinto disastrously paid $50bn in cash for Canada’s Alcan.
The slump in 2016 deals came as low commodity prices for much of the year left sellers who were not distressed on the sidelines, believing prices would rise. At the same time, most buyers would settle for nothing other than an absolute bargain.
This year, commodity prices have started stronger and there is a growing consensus that prices have bottomed, meaning buyers are more likely to accept that they cannot get assets dirt cheap.
While an unexpected late surge in the price of coking coal has stopped Anglo American’s sale of its Queensland mines, more agreement around the prospects for other commodities is expected to make deals easier.
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