Mining companies are going underground to improve performance and consolidate share prices after a series of megadeals.
Industry experts expect a fewer mergers and acquisitions after a rash of transactions.
The industry is beset with economic and political change across the world, so a pause in takeovers and mergers that have taken place in recent years will give some boardrooms the chance to take stock of where they are and how to move forward.
Major issues on board meeting agendas this year will include China’s continuing growth and huge appetite for metals and minerals as the increasingly wealthy middle class demands a better lifestyle and buys the goods and services needed to maintain a better standard of living.
The big mining deal of the year was the Glencore merger with Xstrata. Valued at $56 billion, this super company is ready to move as regulators have given the green flag for the firms to join together.
Glencore Xstrata merger
However, according to accountants PricewaterhouseCooper (PwC), the deal was one of more than 1,800 mergers and acquisitions in the global mining sector in 2012. This was the lowest tally since 2005.
The volume of deals was down nearly a third on the 2,600 that took place in the previous 12 months.
Even including $56 billion Glencore-Xstrata, the transaction value decreased year-on-year as well – from $149 billion in 2011 to $100 billion in 2012.
Markets with the greatest activity were Canada (29%), Britain (11%), Australia (9%) and China (9%).
Companies mining copper and gold accounted for half of the top 20 corporate deals.
The figures come from PwC’s Mining Deals Report 2012 https://preview.thenewsmarket.com/Previews/PWC/DocumentAssets/279079.pdf which tracks activity in the sector.
Hot metals
Investors look to gold and copper for different reasons –
- Gold is seen as a liquid investment and hedge against inflation
- Copper is a sought after metal used in a wide range of industries – from copper pipe in plumping to wiring and conductors in energy, automobiles and industry
- Uranium has provoked investment interest since the tsunami overwhelmed the Fukushima nuclear power station in Japan
- Iron ore also received a boost as the steel industry looked tom increase stocks.
Tim Goldsmith, PwC’s global mining leader said: “The market was strong early last year, but the volume dropped around spring and slowly recovered during the following months. Due to the stock bargains out there, we expect the recovery to continue.
“This year will see assets rationalised and deals will be driven by miners who want to get rid of non-core assets and who are seeking join ventures to cut risks.”
