Eksplorasi.id.Merger and acquisition activity in the global mining and metals sector picked up notably in the second quarter from the previous quarter partly due to medium-sized and large companies disposing of assets to streamline their operations and strengthen balance sheets, a report from consultancy and accountancy firm Ernst & Young shows.
The value of global mining and metals deals rose 93 per cent to $US7.8 billion in the three months ended June 30, 2016, from $US4.1 billion the previous quarter, according to the latest data analysed by EY.
Deal volume also increased 27 per cent to 104 deals in the second quarter, compared with 82 in the preceding quarter, the consultancy said.
“There is a significant amount of speculation around whether we’ve finally reached the bottom of the market, and this rise in M & A activity certainly suggests growing confidence in the mining and metals sector,” said Lee Downham, global mining & metals transactions leader for Ernst & Young.
“Companies — especially mid-tiers and majors — continue to reassess and reduce portfolios to strengthen balance sheets and inject more flexibility into their business models. That, coupled with growing confidence, is translating into increased deal activity.”
Although deal value and volume may have risen on a quarterly basis, figures are less rosy on a yearly basis, reflecting continued uncertainty in mining and metals M & A activity.
Second quarter deal value fell 51 per cent from the corresponding quarter a year earlier, partly due to the BHP Billiton demerger of South32 in 2015. Meanwhile deal volume only rose 13 per cent in the second quarter compared with the corresponding quarter a year earlier.
Asia-Pacific accounted for the highest deal value in the second quarter at $US3.6 billion. This includes Sumitomo Metal Mining’s $US1 billion acquisition of a 13 per cent stake in the Morenci copper mine in Arizona, US, but excludes the major acquisitions by China Molybdenum of Freeport-McMoRan’s stake in the Tenke Fungurume operations in the Congo, and Anglo American’s niobium and phosphate operations in Brazil, which is due to close in the second half of this year.
North America accounted for the greatest volume of deals out of any region at 56 — representing 54 per cent of the global deal volume due to mid-market consolidation in the gold sector there.
“The theme of strategic divestments continues to dominate the transaction landscape, with China demonstrating an appetite to meet vendor expectations on value for world-class assets,” Mr Downham said.
Total capital raised in the sector globally fell 5 per cent on quarter and 28 per cent on year to $US60 billion in the second quarter. This was largely driven by a 23 per cent and 36 per cent drop in loans and bond issues on year, respectively, to $US34.5 billion and $US17.2 billion. But overall capital raising volume rose to 770 transactions in the second quarter, up 30 per cent from the first quarter and up 43 per cent from the previous year.
“Deal activity is likely to remain rocky in the coming months as the sector adjusts expectations and realigns portfolios in response to the current market conditions,” said Mr Downham.
Eksplorasi/Dian/Source
