TORONTO, February 26, 2014 – Despite 2013 being one of the worst years for M&A in recent history, mining activity is expected to increase in the coming months with developed economies beginning to stabilize and miners looking to add assets in a strategic manner, according to PwC’s latest Global Mining Deals Report.
With volume of deals in 2013 falling to its lowest level since 2005, miners will continue to move away from diversification and focus on core assets and commodities. PwC Global Mining Leader and Canadian Mining Leader, John Gravelle, says, “Many companies looking to buy are eyeing similar commodities in familiar regions where they are already operating. “
Gravelle adds, “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.”
2014 mining expectations
The top five deals last year show the changing nature of M&A in the current environment. According to the Global Mining Deals Report, instead of outright takeovers, companies are buying and selling smaller portions, which is what lead to the drop in overall deal value in 2013. Deal trends to look for in 2014 include:
East vs. west
There was a geographic shift among buyers in the mining sector in 2013 – the eastern world dominated deal activity over the west. While the west was more active in number of deals done, the value of those deals was highest in the eastern part of the world.
The east accounted for nearly half of the deals by value in 2013, or about 45%, while the west represented about 36%. Gravelle says, “Many of the leading deals in 2013 were between governments and/or wealthy private investors, which added to the changing landscape compared to previous years.”
“Looking ahead, many western-based majors are still going to wait for commodity prices to stabilize, concentrating on cash costs, rationalizing their assets and trying to divest assets as a way to pay down debt and fund existing operations,” says Gravelle.
Down but not out
According to the report, deal activity is already off to a relatively strong start in 2014 with Goldcorp’s hostile bid for Osisko and HudBay’s bid for Augusta Resources.
“The turnaround won’t mirror the surge in movement we saw back in 2011, but expect deal making to resurface in most parts of the world this year as both an opportunity and in some cases a necessity for companies across the sector,” says Gravelle. “Companies have been cleaning up their balance sheets and putting off decisions, waiting for the right time to act – that timing is near.”
For more information on the 2014 Mining Deals Report, please visit http://www.pwc.com/ca/miningdeals.
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