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PERTH (miningweekly.com) – Consolidation in the Australian gold and coal sectors is set to continue in 2015, advisory firm Ernst & Young (EY) Oceana mining and metals transaction leader Paul Murphy said this week.
Gold consolidation has been a key driver of transaction activity in Australia, accounting for 30 of the 85 Australian-target deals in 2014.
“Outside the gold and coal sectors, there has been little urgency to complete deals quickly, but we are seeing signs of momentum slowly building,” said Murphy.
“Continued weakness of the iron-ore price increases pressure for restructuring, rationalisation and refinancing, which will act as a catalyst for merger and acquisition (M&A) activity in the midtier and higher cost end of the industry.”
EY reported that 114 mining and metals deals were completed in Australia in the year to September 30, with total deal value of $4-billion. Deal volume declined by 22% and deal value increased 10% compared to the same period last year.
Murphy noted this week that only Canada posted a higher volume of deals for the first three quarters, with 167 with total deal value of $7.7-billion.
It was a similar story for most targeted countries, with Canada topping the list at 112 deals and Australia second at 85.
In Australia, gold accounted for 35% of the number of M&A transactions, while coal accounted for a further 14%.
The 83 global mining and metals sector respondents to EY’s latest capital confidence barometer also points to increasing M&A activity, with 46% expecting to pursue an acquisition in the next 12 months, nearly double that six months ago and the highest level in two years.
“We haven’t seen deal intentions and confidence this high in some years and this suggests a much more robust transactions market in 2015,” said Murphy.
The barometer showed far more mining and metals companies were now confident in the likelihood of closing acquisitions, with 60% of respondents indicating a positive view, up from 26% six months ago; the quality of acquisition opportunities also found favour with 60% of respondents, up from 34%, while 67% of respondents were also impressed with the number of acquisition opportunities, up from 42%.