Photo by: Bloomberg
PERTH (miningweekly.com) – Although mining and metal deal volumes in Australia rose by 41% year-on-year in 2016, the value of these deals fell by 73%, new research by advisory firm EY has revealed.
Australian mining and metal deal value fell to $3.5-billion in 2016, EY’s quarterly ‘Mergers, Acquisitions and Capital Raising in the Mining and Metals Sector’ report found.
This drop in value was slightly offset by the increase in transaction volumes, which rose from the 68 deals in 2015 to 96 deals.
“There was a lack of large assets available in 2016, as sellers were wary to transact while the resurgent coal price was driving up values. However, with a number of coal assets already listed in 2017, we can expect to see this trend reversed as sellers seek to capitalise on regional demand for high-quality Australian coal,” said EY Oceania mining and metals transaction leader Paul Murphy.
“Globally, the shift towards energy policy, driven by clean coal, is a positive sign for the owners of Australian assets, as this will continue to generate strong demand for high-quality producers in the medium term.”
Meanwhile, EY reported that China had more than doubled the value of domestic and cross-border acquisitions in 2016, accounting for 19% of global deal volumes.
Four of the top ten deals in the sector were undertaken by Chinese acquirers, and the Asia-Pacific region accounted for 49% of global deal volume. China Molybdenum’s activities alone accounted for $4.3-billion worth of acquisitions, just under 10% of the overall deal value in the sector.
In 2016, capital raised in China also doubled from the previous year, to $100-billion, due to a significant rise in domestic corporate bond issues. This masked an overall decline across the sector globally, with Chinese bond activity driving a 9% increase in total capital raised, to $249-billion.
Excluding China, global capital raised declined by 16% to $149-billion.
“The Chinese market is maturing, moving from relatively indiscrete expansionary acquisitions, to activity driven by cost efficiency, vertical integration and portfolio optimisation,” said Murphy.
“In 2016, this activity was concentrated on copper assets, with Chinese buyers seeking to shore up a more stable supply, despite record exports in the calendar year.”