Global mining and metals deal value remains flat in Q3 while deal volume increases 12%

London, 27 October 2016

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  • Deal value down 43% in first nine months of 2016 compared with last year
  • China the highest value dealmaker in the third quarter
  • Traditional industry acquirers still focused on portfolio realignment

Global mining and metals M&A activity remained subdued in Q3 with deal value flat at US$7.9b and deal volume up by 12% to 121 deals quarter-over-quarter, according to the EY Mining through the cycle: exchange performance comparison report. Compared with 2015, deal value declined 43% in the first nine months of 2016 despite an increase in the volume of deals.

Capital raised in the sector followed a similar decline trend in Q3. Total capital raised was US$49.9b in Q3, down 17% from US$60b in Q2.

China was the highest value dealmaker in the third quarter as the target of US$2.4b in transactions and the acquirer in US$3.8b worth of transactions ¾ representing 29% and 48% of respective global totals. This was buoyed by China Molybdenum’s US$1.5b acquisition of Anglo American’s niobium and phosphate assets in Brazil. The majority of Chinese deals were domestic (89%), reflective of significant consolidation within the region.

Lee Downham, EY Global Mining & Metals Transactions Leader, says:

“The continuing fall in M&A deal value doesn’t necessarily reflect a worsening of conditions for dealmaking in the sector. The priority for miners continues to be portfolio realignment rather than acquisitions for future growth. These divestment strategies are driving activity rather than a rush to consolidate as we saw at the peak of the super cycle.”

A number of high-value mergers on the horizon may drive some momentum across the global mining and metals sector, including that between Potash Corp. of Saskatchewan and Agrium, and the restructuring deal between Baosteel Group and Wuhan Iron & Steel Group. Portfolio realignment programs are widespread and a key driver of M&A activity, driving asset sales from Anglo American and Freeport-McMoRan, among others.

Downham says: “Efforts to reduce capital expenditure, cut costs and divest non-core assets continue to improve mining and metals companies’ financial position. As the sector becomes increasingly adept at managing volatility, we will see corporates begin to consider strategies that are more focused on future growth. This may be in the form of all-share mergers to create synergies and scale or transactions focused on creating regional diversification among the single-asset producers.”

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About the data

All mergers and acquisitions data, and capital raising data was extracted from ThomsonONE and analyzed by EY. Only completed deals are included in the data and analysis.