TORONTO (miningweekly.com) – Despite 2013 being one of the worst years for mergers and acquisitions (M&A) in recent history, mining activity was expected to rise in the coming months with developed economies beginning to stabilise and miners looking to add assets in a strategic manner, professional services firm PwC's latest ‘Global Mining Deals' report has found.

With the volume of deals last year falling to its lowest level since 2005, miners were expected to continue to move away from diversification and focus on core assets and commodities.

PwC global mining leader and Canadian mining leader John Gravelle said that many companies interested in buying were looking at similar commodities in familiar regions, where they were already operating.

"Overall, the mining sector has experienced short-term pain for what could be longer-term gain. To once again create shareholder value and extend mine life, miners will need to continue to acquire assets,” he said.

The top five deals last year pointed to the changing nature of M&A in the current environment.

According to the report, instead of outright takeovers, companies were buying and selling smaller portions, which was what led to the drop in overall deal value in 2013.

PwC said that it expected many mining executives to complete joint ventures in strategic assets, as opposed to assuming all the deal risk associated with financing the development on their own. A current example of this was global miner BHP Billiton announcing its interest in finding a partner for its Jansen potash project, in Saskatchewan.

Despite many mining majors being expected to remain sellers of assets, more midtier companies would be active buyers in 2014. A few midtiers had indeed indicated they were ready to make acquisitions, while others had announced their intention to consider strategic options.

Meanwhile, junior mining companies were expected to become more active with M&A this year. Many would need to sell or merge with another company to stay afloat. “There's also an increase in earn-in-type arrangements in the junior sector, which is positive from an exploration angle and should help increase their valuations moving forward,” the firm reported.

While gold M&A deals totalled only 412 deals in 2013, down from 548 in 2012, buyers were seeing an opportunity to buy more gold assets after the price fell by nearly 30% over the past year to about $1 250/oz. The report noted that gold M&A would increase in the coming months, but mostly with smaller, strategic deals in fiscally stable, gold-rich countries such as Canada.

PwC also noted that there was a geographic shift among buyers in the mining sector in 2013 - the eastern world dominated deal activity over the west. While the west was more active in the number of deals done, the value of deals was higher in the eastern part of the world.

The east accounted for nearly half of the deals by value in 2013, or about 45%, while the west represented about 36%.

"Many of the leading deals in 2013 were between governments and/or wealthy private investors, which added to the changing landscape compared to previous years. Looking ahead, many western-based majors are still going to wait for commodity prices to stabilise, concentrating on cash costs, rationalising their assets and trying to divest assets as a way to pay down debt and fund existing operations," Gravelle said.

According to the report, deal activity is already off to a relatively strong start in 2014, with Goldcorp's hostile bid for Osisko and HudBay's bid for Augusta Resources.

"The turnaround won't mirror the surge in movement we saw back in 2011, but expect deal-making to resurface in most parts of the world this year, as both an opportunity, and in some cases, a necessity for companies across the sector. Companies have been cleaning up their balance sheets and putting off decisions, waiting for the right time to act - that timing is near,” he added.