OREANDA-NEWS. March 22, 2012. Аccording to PwC’s Global Mining 2011 Deals Review & 2012 Outlook: On the road again report, in 2011, growth market miners by value represented almost a quarter (24%) of global mining M&A. This is nearly 50% higher than the total deal value seen at the 2006 market peak, reported the press-centre of PwC.
 
Tim Goldsmith, global mining leader, PwC, said:

“While these markets aren’t yet dominant, with each passing year, growth market miners are increasingly becoming forces to be reckoned with. 

“Africa is set to emerge as one of the most important mining geographies of 2012 with unparalleled resource potential and an increasing investor climate.

"Of course we have, and will continue to see, many deals for African assets and note that emerging nations such as China already have a major footprint in the mining industry throughout the continent."

Regarding Western-led deals in 2011, many developed world buyers are ‘playing it safe’ – 72% involved acquisitions of projects in another developed world region.  The report indicates that this trend may be a barrier to long-term growth, given that roughly three-quarters of known reserves lie in countries outside the developed markets.
 
2011 by numbers

In 2011, more than 2,600 M&A deals worth USD 149 billion were announced in the global  mining sector.  Volumes were close to historic highs and values were 33% higher than 2010.

The United States, Australia and Canada led the charge in mining sector deal making, accounting for 53% of annual acquisition values - while 30% of all 2011 global mining acquisitions involved a Canadian buyer.

This same trend is evident when segmenting the market by volumes. Australia, Canada and the US represented 57% of buy side activity. 2011 saw buyers based in China and Russia lead 16% of deals by value and 11% by volume.

In terms of project locations acquired, Canada took top honours with a 25% market share. US projects continued to be popular, taking second place with 15% market share by volume. China and Russia, representing 6% and 3% respectively, round out the top five.

An interesting facet of mining M&A involving growth market was that many buyers preferred projects located in their own markets:

64% of Chinese-led acquisitions involved projects in mainland China.

90% of Russian-led acquisitions involved projects in Russia.

100% of Mexican-led acquisitions involved projects in Mexico.

 75% of Brazilian-led acquisitions involved projects in Brazil.

India was a notable exception to this trend. Although 50% of acquisitions included an India-based project, Indian buyers extended geographic reach more broadly with acquisitions led by sourcing for raw material not locally available.

Coal targets had the highest average deal value of all resources (USD 871 million) as mass consolidation between seniors continued across the Americas, Australia and Russia.

Outlook for 2012

Financial buyers (Sovereign Wealth Funds , specialised private equity, large pension funds) eager to deploy capital will re-evaluate their approach to the resource sector

Emerging nations remain the key drivers of global economic growth

The “top five” resources (gold, copper, coal, iron ore, silver) are expected to be busy. 

Western buyers will be forced to identify business models that make the growth market deals “work”

An increasingly friendly investor climate will prompt an ‘African Renaissance’ characterised by increased investment into Africa’s unparalleled mining sector

In 2012, the report forecasts continuing high M&A volumes and values in the global mining sector.

Tim Goldsmith, global mining leader, PwC, said: 

“With demand for new projects, rising production costs and declining developed world reserves, miners will seek out targets to build scale and achieve cost efficiencies.

“Activity will be underpinned by the continued need for base and precious metals by the world’s rapidly industrialising nations.”