TORONTO (miningweekly.com) – Global mining and metals deal values and volumes are down, with Canadian numbers falling in the first nine months this year, advisory firm Ernst & Young's (E&Y’s) seventh biannual ‘Global Capital Confidence Barometer’ has found.
Deal values had declined by 43% year-on-year and volumes had declined by 16% year-over-year.
"Our survey results reveal that only 38% of companies, down from 53% in April, are focused on growth in the next 12 months, while 27% are refocusing on business fundamentals, including cost reduction and operational efficiency," E&Y Canadian mining and metals leader Bruce Sprague said on Wednesday.
Cost inflation, slowing economic growth, heightened geopolitical risk and volatile prices have sparked this shift in mining and metals companies' mindsets.
"Executives are trading in their 'growth for growth's sake' mentality and refocusing on capital optimisation. Nearly a third of our survey respondents cited cost reduction and operational efficiencies as key priorities in the next year,” Sprague said.
But, confidence in doing deals is improving, with 28% of respondents expecting to pursue an acquisition in the next 12 months. That's up from 18% in April.
"While the value and volume of transactions is down, mining and metals companies' confidence in the current M&A environment is on the rise. Expect to see companies move away from diversification and toward synergistic deals that create economies of scale and take advantage of low valuations across the sector,” he added.
Smaller deals and strategic partnerships are on the boardroom agenda as companies manage pressure to generate returns on investment, especially in light of recent cost overruns and integration issues.
"While many companies are refocusing on efficiency and cost control, risk management and capital allocation, new transaction opportunities exist for those with strong balance sheets – opportunities few can afford to miss out on in an era of intense global competition for resources," says Sprague.
E&Y surveyed more than 1 500 senior executives from large companies around the world and across industry sectors. The barometer's objectives are to gauge corporate confidence in the economic outlook, understand boardroom priorities over the next 12 months, and identify the emerging capital practices that will distinguish companies that build competitive advantage as the global economy continues to evolve.