https://www.miningweekly.com

Miners starved of M&A set to see deals revive following cutbacks

9th June 2016

By: Bloomberg

  

Font size: - +

LONDON – The metals and mining world might be about to see a resurgence in deal-making.

Mergers and acquisitions in the sector reached a decade-low last year, accounting for 3% of transactions across all industries, Macquarie Group said. As long as commodities don’t plunge, weaker prices in the second half may spur more deals as buyers gain the upper hand and sellers become more desperate, according to the bank’s survey of more than 60 companies.

This year “could mark the turning point in deal activity," Macquarie analysts including Alon Olsha said in a report Wednesday. "2016 should be the nadir for deal firepower."

The Bloomberg Commodity Index reached the lowest in more than two decades in January amid slowing demand from top user China following years of over-investment in supply. Producers responded by cutting output, jobs and exploration spending and reducing debt. While that helped raw materials enter a bull market this week, prices are still more than 60% below a 2008 peak.

There are signs of deals picking up. Freeport-McMoRan  last month agreed to sell its stake in a Democratic Republic of Congo copper mine and Anglo American recently disposed of its niobium and phosphates business. Glencore is selling two copper assets and exploring options for a gold mine in Kazakhstan.

FUTURE RETURNS
"For natural resources companies, growth is not simply an advantage over peers,” Macquarie said. “It’s an existential imperative as resources are finite and must be replenished. The sector must guard against capital austerity today compromising on growth and returns tomorrow.”

A total of 143 metals and mining firms covered by the bank would be able to make $61-billion of deals this year, it said. While that’s down from $332-billion in 2011, the figure should rise to $122-billion by 2018, Macquarie said. Activity may pick up as the majority of those surveyed said they intend to make some kind of asset “reshuffling” in their portfolios in the next 12 to 18 months.

Copper and gold assets are the most desired by producers and Rio Tinto Group and Barrick Gold may be the standout buyers in their industries, the bank said. Rio Tinto, the world’s second-biggest miner, is one of the few with “significant deal firepower,” able to spend $11-billion to $16-billion, Macquarie said.

Others best positioned for deals include BHP Billiton in coal, South32 in copper, nickel and zinc and Mitsui & Co in copper and coal, according to Macquarie. Antofagasta and Sibanye Gold could also be set to purchase assets, it said.

The chance of large-scale mergers and acquisitions is still limited because most would fund deals through debt or excess cash. Good assets are in short supply and expensive valuations are the main obstacles, the bank said.

Edited by Bloomberg

Comments

Showroom

AutoX
AutoX

We are dedicated to business excellence and innovation.

VISIT SHOWROOM 
Schauenburg SmartMine IoT
Schauenburg SmartMine IoT

SmartMine IoT has been developed with the mining industry in mind, to provides our customers with powerful business intelligence and data modelling...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

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:0.19 0.234s - 106pq - 2rq
Subscribe Now