On the road again? Global Mining 2011 Deals Review & 2012 Outlook

Global Mining Deals 2011 presents PwC views on Mining M&A in the year ended December 31, 2011. “On the road again?” borrowed from American philosopher and musician Bob Dylan, is a reference to the brazen wisdom demonstrated by the mining community in 2011,so confident in the long term fundamentals that, for the most part, these critical voices were drowned out. Buyers were plentiful, bidding wars ensued and valuations were high. Not at all the kinds of behaviours expected in a cyclical downturn. Our annual M&A year in review revisits the 2011 trends: who was buying and selling, what resources were sought out, what drove deal premiums and, of increasing importance, what the differences were in buying behaviours between developed and growth market buyers. In 2011, more than 2,600 M&A deals worth $149 billion were announced in the global mining sector. Volumes were close to historic highs and values were 33% higher than 2010.

A nod to historic precedent can shed light on important drivers for mining M&A. But, with a view to moving forward, we are also pleased to share our 2012 mining M&A outlook. "We anticipate a record year of mining M&A ahead, primarily driven by cash-rich seniors and intermediates hungry for projects. 2012, however, is unlikely to be 'more of the same'. With demand for new projects, rising production costs and declining developed world reserves, miners will seek out targets to build scale and achieve cost efficiencies. Activity will be underpinned by the continued need for base and precious metals by the world’s rapidly industrialising nations.

In 2012, we expect that the West will increasingly find itself in an unfamiliar world. The roads ahead, in frontier markets, are not those that have been mastered by many of the miners of our age. We believe that shifting centres of gravity, from the west to the east, will increasingly challenge the traditional economics behind mining M&A deals and force Western boards and shareholders to reconsider the manners in which the balances of risk and reward are weighed. It looks to be another year of game-changing M&A indeed" says Tim Goldsmith, Global Mining Leader, PwC.