Despite some of the troubles and turmoil for the mining industry in 2011 the year proved to be an active one in terms of mergers and acquisitions. In fact, PwC’s Global Mining Group reports that 2011 was the second busiest year in history for mergers and acquisitions in the mining industry with a total disclosed value of activity at $149 billion. This is a 33 percent increase over 2010 according to the report, “Global Mining 2011 Deals Review & 2012 Outlook,” from PwC.
The report noted, “Although 2011 saw only one $10 billion + deal, overall, seven deals worth more than the U.S. dollar equivalent of $5 billion were announced. Total values in the $5 billion+ segment registered increases of 145 percent and 490 percent over 2010 and 2009 respectively."
“Deals in the $1 billion - $5 billion segment were also impressive with 23 transactions worth $43 billion being announced. Measured by value, this represented a 14 percent increase over the prior year and was double the 2009.”
The report also looked at the smaller deals that took place among the juniors and noted, “At the opposite end of the spectrum, the junior sphere also had a blockbuster year. In the less than $100 million segment, 1,355 deals worth $36 billion were announced, both all-time records.
“Conversely, the mid-size deal segment between $100 million and $1 billion experienced a moderate year over year contraction in aggregate value as 25 deals worth $17 billion were announced, a decrease of 6 percent over 2010,” PwC observed.
Only 107 mining M&A deals were cancelled in 2011, the lowest annual cancellation number since 2004.
In their analysis, PwC found Buyers in the U.S., Australia and Canada drove the lion's share of M&A values in the mining sector last year, accounting for 53 percent of annual acquisition values, up from 46 percent in 2010. Australia remained in the top spot with 22 percent market share, while the Americans supplanted the Chinese to become the second most acquisitive by value, representing 17 percent of buy-side values.
In more than 51 percent of global mining acquisitions in 2011, acquired projects were located in the U.S., Australia and Canada, which ranked highest with a 25 percent market share, said PwC. China and Russia round out the top five in terms of project locations acquired.
China dominates buy-side activity among its growth market counterparts. “Buyers based in China represented close to half of growth market led deal activity in 2011," PwC noted. "Overall, annual Chinese buying volumes increased 40 percent over the 2006 peak volumes and 300 percent over 2006 peak market values.”
The PwC report found that among growth market buyers, Asia was the most common investment destination at 57 percent, followed by Africa at 16 percent. Sixty-four percent of Chinese led acquisitions involved mining projects in mainland China.
“In 2011, across almost all resource categories, miners were bold, willing to bet on the long-term fundamentals behind five key resources, rather than focus on short-term market pricing gyrations," said the report. Targets with an interest in gold, coal, copper, iron ore or niobium represented 81 percent of aggregate target values in 2011.
Coal targets had the highest average deal value of all resources at $871 million as mass consolidation between seniors continued across the Americas, Australia and Russia.
“The average size of gold acquisitions, at $41 million, was the smallest amongst all resources,” PwC said. “This was largely due to an absence of large takeover targets rather than a compression in deal valuation.