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Mining & Resources

Mining mergers and acquisitions expected to pick up

5 Mar 2014, by Informa Insights

John Gravelle
John Gravelle

Following a torrid year for mergers and acquisitions (M&A) in the mining industry, deal activity in the sector is predicted to rise once again, according to a new report from PricewaterhouseCoopers (PwC).

PwC expects mining activity to recover this year as developed economies stabilise and mining companies take a more strategic approach to adding assets.

John Gravelle, global mining leader at PwC, said that the historically low level of M&A deals last year meant mining companies have had to turn to new strategies to survive.

“Many companies looking to buy are eyeing similar commodities in familiar regions where they are already operating,” he explained.

“While 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.”

In its report, the consulting group highlighted some of the biggest M&A trends the mining industry could expect this year. For example, mid-tier mining companies are likely to “step up” and feature more heavily as buyers in the acquisitions market. Junior companies are also expected to increase their merger and acquisition activity, largely out of necessity, as these are the strategies they will have to adopt in order to survive.

China Nickel - Banner (1200 x 318px)The sinking price of gold also means that gold assets will be high on the shopping list this year, according to PwC. Gold M&A activity dropped by more than 100 deals from 2012 to 2013, but with prices falling by almost 30 per cent over the course of last year, deal volume was likely to rise again. The bulk of this is expected to be concentrated in “fiscally stable, gold-rich countries” such as Canada.

“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,” Mr Gravelle concluded.

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