https://www.miningweekly.com

Distressed mining assets may drive 2016 M&A activity

Distressed mining assets may drive 2016 M&A activity

Photo by Duane Daws

26th January 2016

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

Font size: - +

JOHANNESBURG (miningweekly.com) – Boardroom confidence is expected to continue this year, after record high mergers and acquisition (M&A) activity in 2015; however, the downward spiral of commodity prices may force distressed mining assets onto the market.

Unpacking expectations for the year ahead, international law firm Allen & Overy partner Dominic Morris said mining companies had been able to hold their own in a volatile environment, with limited serious M&A activity occurring in the sector over the last year, barring those raising cash to shore up balance sheets.

However, with commodity prices plunging below the threshold that had allowed mining companies to “limp along” until now, “distress” would ultimately drive new deals as companies moved to shed capital expenditure drains and raise cash in a troubled environment.

Companies had remained focused on reducing both capital and operating costs, conserving cash and “resisting doing deals”; however, the question for mining groups was how long they could “limp on” before a spate of distressed assets were put up for sale.

Weaker global growth expectations, softening demand, the strength of the dollar and continued uncertainty surrounding metal demand in China, had maintained pressure on base metals prices, with Moody’s Investor Services previously warning of an impending “deeper and longer” downturn in 2016.

Moody’s had put the 2016 base price of gold at $1 100/oz, metallurgical coal at $80/t, thermal coal at $55/t, aluminium at $0.70/lb, copper at $2.15/lb, nickel at $3.80/lb, iron-ore at $40/t and zinc at $0.75/lb.

Companies were already signalling distress, with the mining sector exiting a “very gloomy year” by deteriorating further.

The slump had hit Africa particularly hard, seeing as the continent was made up of mostly commodities-based economies, while South Africa had been further impacted by government intervention, continued labour problems and unreliable power supply.

Edited by Creamer Media Reporter

Comments

Showroom

Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones, wear-resistant linings,...

VISIT SHOWROOM 
TGOOD
TGOOD

At TGOOD, we pride ourselves on our passionate team of professionals. As a world leader in pre-fabricated outdoor electric substation buildings, we...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Photo of Martin Creamer
On-The-Air (29/09/2023)
29th September 2023 By: Martin Creamer
Magazine round up | 29 September 2023
Magazine round up | 29 September 2023
29th September 2023

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.158 0.194s - 105pq - 2rq
Subscribe Now