MERCHANDISER
While Q1 2012 deal volume was on par with
Q4 2011 activity (and in value terms 10% lower,) M&A volumes and values were down 34% and 20% respectively on Q1 2011. “However, there is a strong deal pipeline – not
At a Glance: Q1 Yearly Comparative Transactions, US$m Quarter
Volume Value
least of which the proposed merger of Glencore and Xstrata – which indicates a sustained appetite to do deals,” says Downham. “Miners are increasingly unwilling to sit out the volatility
Average Value
Q1 2010 299
18,116 61
Q1 2011 297
31,572 134
Q1 2012 195
25,310 130
Mining and metals companies completed ten megadeals in Q1 2012, twice as many as in the same period in 2011. Canada regained its position as the top ranked target
and are prepared to act opportunistically and strategically. Robust long term demand fundamentals and strong balance sheets will drive deal activity through 2012.” “Relatively lower valuations in today’s uncertain
environment are attracting investor interest. It will be fitter and faster companies that will be best placed to maximize the opportunities for transactions this year.” Downham says the drivers for M&A in the sector globally
include the need to secure raw materials, as well as companies seeking to increase penetration in growth markets, achieve greater vertical integration and consolidate market share. “This year is emerging as a year of extremes, with a
greater number of megadeals (deals over US$1 bn) in Q1 2012 compared to Q1 2011 but with a lower average deal size due to the smaller size of the majority of deals,” he says. “The number of megadeals reflects the scarcity of large, quality assets and fierce competition for them, while the large number of smaller deals reflects an increasing interest in exploration projects.”
Acquisitions Spending
Totals $47.4 bn in 2011 ACCORDING TO METALS Economics Group’s (MEG) recent Strategic Report, the 2011 dollar volume of significant ($25 million minimum) acquisitions totalled $47.4 billion – down 4% from 2010’s $49.3 bn. In the context of an ongoing European economic crisis and lower growth expectations for China, 2011’s total spending signifies the mining industry’s relative confidence in the stability of metals prices and demand, after a period of significant strategic retrenchment and caution following the worldwide recession and sharply lower metals prices that began in late 2008 and lasted into early 2010. Data analysed from MEG’s Acquisitions Service
shows copper deals dominated base metals acquisitions spending, accounting for the lion’s share of the 47% increase in the total base metals (copper, nickel, and zinc) spending of $29 bn in 2011. In contrast, gold acquisition spending slipped 39% year on year, to a total of $18.4 bn. Considering the 50 base metals transactions, acquisitions with primary assets in Latin America
destination by total deal value in Q1 2012, with the majority of deals small domestic transactions targeting junior explorers and mineral properties. China was the second most targeted destination as well
as the largest acquirer by deal value, with the majority of Chinese deals domestic transactions primarily driven by consolidation activity. In the IPO sector, the number of mining and metals listings
globally for Q1 2012 was just 17, half the 31 IPOs seen in the same period last year and down on the 28 listed in Q4 2011. “This obviously reflects the ongoing difficult conditions in
equity markets, a trend seen globally across all sectors, not just mining and metals,” says Downham. Hong Kong Stock Exchange hosted the two largest listings,
Xiwang Special Steel and Kinetic Mines & Energy, accounting for 83% of total Q1 2012 IPO proceeds, while the Toronto Stock Exchange and Australian Stock Exchange accounted for most by volume, mostly junior exploration listings. •
accounted for 62% of the acquired in-situ value in 2011. Assets in the Australia-Pacific region accounted for 14% of the total, Africa 12%, Asia 5%, North America 4%, and Europe 3%. The acquired value of reserves and resources in 2011 base metals transactions totalled $697 bn, including 68.5 million mt of copper. Of the 54 primary gold transactions, Africa was
tops with 12 deals containing $77 bn of in-situ value – 33% of the 196.8 million oz acquired globally. It was followed by Asia with six transactions accounting for 21% of the total. In US dollar terms, the total price paid in 2011’s
primary gold transactions fell 38% compared to 2010, and the quantity of gold acquired slipped 11.5%. The most active acquirers by value in 2011 were Canadian gold companies with 15 transactions out of the total 54. Chinese companies were next with seven deals.
To purchase the Report go to:
www.metalseconomics.com/online-store MEG’s Acquisitions Service gives clients a competitive
edge in project and company valuation by reporting and analysing current and historical transactions involving
advanced-stage base metals and gold projects, operating mines, and companies.
June 2012
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