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Mining deal value declines $18bn in first half as Covid-19 disrupts flow of capital - GlobalData

7th September 2020

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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Global mining deal value, suffering from the shock of the Covid-19 pandemic, fell by more than $18-billion year-on-year in the first six months of the year, to $46.6-billion, says data analytics company GlobalData.

The company notes that an expected slump in the global economy, steered by a series of challenges, has kept investors away from long-term financial instruments, resulting in a 12.7% year-on-year fall in the capital raised by mining companies.

Despite a decent first quarter, resulting from merger and acquisition deals among gold companies, overall merger and acquisition performance declined by 51.6% during the first half of the year.

Overall, the majority of the impact was evident on the completion rate, as there was a 41.7% year-on-year fall in the completed deal value.

Seven of the top ten asset transaction deals involved gold. Topping the list was Mudrick Capital Acquisition Corporation, which bought an equity interest and assets from Hycroft Mining Corporation for $537-million to form Hycroft Mining Holding Corporation.

The remaining three deals involved cobalt, coal and copper.

GlobalData senior mining analyst Vinneth Bajaj says that the largest of the completed deals was the acquisition of Detour Gold by Kirkland Lake Gold for $3.79-billion.

“By including the Detour Lake mine to its production assets, the company aims to produce up to 1.5-million ounces of gold in 2020.”

Bajaj adds that, with this acquisition, Kirkland also added $173.9-million in cash and repaid Detour’s debt of about $98.6-million.

“Furthermore, with strong liquidity, the company is well-positioned to cope with Covid-19 challenges. Kirkland also raised $1-million in a private placement of shares primarily to complete Phase 2 permitting of its Hasbrouck project in the US.”

Alongside that, PT Indonesia Asahan Aluminium raised $2.5-billion by offering three sets of bonds at 4.75% (due in 2025), 5.45% (due in 2030) and 5.8% (due in 2050). Of the total, 60% will be used to pay debts and to acquire 20% of PT Vale Indonesia, while the remaining 40% will be used to refinance the company’s older bonds.

Moreover, GlobalData reports that Freeport-McMoRan raised a collective $1.3-billion, which will be used to fund its purchase of certain outstanding senior notes due in 2021 and 2022.

He says the total volume of deals increased from 1 811 in the first half of 2019, to 2 271 in the first half of this year, owing to a 79.7% increase in the total number of announced capital raising deals in that period.

“This was accompanied by a 28.4% increase in the volume of completed merger and acquisition deals. Canada, the US, Australia, China and India accounted for nearly 87% of the total deal volume and over 72% of the total deal value.”

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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