A new report suggests takeover and merger activity in the global mining sector has slowed significantly this year due to lower commodity prices but Canadian companies remain leading deal-makers.
The PwC Mining Deals report says global number of merger and acquisition deals among mining companies fell by 30% in the first half of 2012 to 940 deals, compared with 1,371 in the same period of 2011.
The total value of deals, however, rose to $79 billion from $71 billion in the year-earlier period.
The six-month period includes Switzerland-based Glencore International PLC’s $53.6-billion offer for Xstrata PLC.
Excluding that deal, which hasn’t closed and remains in doubt, the total value of deals drops to $25 billion, only one-third of the comparable figure for 2011.
PwC says Canada was at the forefront of M&A activity in the first half of 2012, excluding the Glencore deal.
In the midst of the downturn, miners with cash have used falling stock prices to take advantage of lower valuations to buy smaller rivals. Miners are also finding creative ways to finance projects, the report suggests.
“Even though market anxiety has led to a pullback in equity financing, most miners are in much better financial shape than during the 2008-2009 global financial crisis, and wiser having gone through it,” says John Nyholt, Canadian mining deals leader at PwC.
“With market conditions expected to remain tight for months to come, miners are looking for new ways to ensure future growth. M&A activity in the coming months will be spurred on by both opportunity and survival.”
The gold sector led transactions during the first six months of the year and Nyholt expects more gold deals in the future due to lower valuations, a rising gold price and the drive to find new resources for future growth.