Low Q1 deal numbers mask a stronger mining M&A pipeline

London, 8 May 2014

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Muted transaction numbers in the global mining and metals sector mask the strongest pipeline of deals seen for a long time, according to EY Global Mining & Metals Transaction Leader, Lee Downham. 

EY quarterly M&A analysis and latest Capital Confidence Barometer: mining & metals sector, released today, shows 135 deals in the sector during Q1 this year, totaling US$6.7b. This is down 31% and 67% respectively on the same quarter in 2013, though deal volume was on par with Q4 2013.

The Capital Confidence Barometer is based on a global survey of more than 1,600 executives in 54 countries, including 128 in the mining and metals sector.

“The Q1 completed deal numbers don’t really reflect what we are seeing in the market as the rate of announced and yet-to-be-announced deals has increased. There remains a backdrop of caution however the mood is much more positive. We are beginning to see that translate into confidence to do deals, as reflected by the large pipeline of announced acquisitions, particularly in the gold sector,” says Downham.

This is reflected in the Barometer results, with nearly two thirds (60%) of mining and metals sector respondents expecting global deal volumes in the sector to improve in the next 12 months. Additionally, 53% of mining and metals companies have a pipeline of 2-3 deals for the next 12 months.

Downham says the expected gradual increase in deal volumes in the sector will be driven by portfolio optimization among larger miners, financial buyers, and consolidation amongst juniors and mid-tier companies.

The war chest raised by private capital funds – estimated to be a minimum of US$10b and thought to be as high as US$20b – is beginning to be deployed, though these funds and other financial investors are likely to face more competition as corporate confidence and access to capital improves.

Key statistics for global mining and metals Q1 2014 M&A

  • There were 135 deals worth US$6.7b. This is down 31% and 67% respectively on Q1 2013, and down 1% and 69% on Q4 2013.

Top three commodities by value:

  1. Steel (US$4,023m)
  2. Gold (US$728m)
  3. Coal (US$624m) 

Top three commodities by volume:

  1. Gold (46 deals)
  2. Coal (12 deals)
  3. Uranium (8 deals) and silver/lead/zinc (8 deals) 

Top three target countries by value:

  1. USA (US$1,732m)
  2. Italy (US$1,725m)
  3. Venezuela (US$668m) 

Top three target countries by volume:

  1. Canada (44)
  2. Australia (36)
  3. USA (11) 

Top three acquiring countries by value:

  1. Germany (US$1,862m)
  2. USA (US$869m)
  3. Japan (US$804m) 

Top three acquiring countries by volume:

  1. Canada (49)
  2. Australia (33)
  3. USA (11) 

Value of deals by acquirer type:

  1. Industry acquirers (US$5,175m)
  2. State backed acquirers (US$701m)
  3. Commodity traders (US$402m) 

Volume of deal by acquirer type:

  1. Industry (84)
  2. Financial investors (34)
  3. Other sector acquirers (10)

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