TORONTO, March 19 /CNW/ - Mergers and acquisitions (M&A) levels in the
global mining market have reached unprecedented levels and a new era of
super-consolidation begins. According to 'Mining Deals', a report from
PricewaterhouseCoopers (PwC) the huge surge in mining company M&A is
particularly noticeable among Canadian companies however the total value of
these deals is down.
The volume of mining deals around the globe rose a tremendous 69% from
2006 to 1,732 in 2007. Total transaction value was US$158.9bn, up by 18% on
the previous year. Of the 2007 deals, Canadian companies were targets the
majority of the time (32%), versus 2006 where Canadian companies were the
targets 23% of the time. In 2007 Canada was followed by Australia (22%) and
China (9%). Canadian companies were also the majority of acquirers 41% of the
time, up from 34% last year. As acquirers in 2007, Canadian companies were
again followed by Australia (22%) but then the US (8%).
In 2007 Canadians led total value of deals when they were targets with
47% of the total deal value or US$74bn. When Canadians were acquirers the
deals represented 16% of total deal value or US$25.9bn. This is up from 2006
where the total value where Canadian companies were targets was US$50.6bn
(38%) of the total global deals. In 2006, when Canadian companies were
acquiring, they accounted for 15% of total global deal values (US$19.9bn).
"More deals but lower values are a trend around the world," says
Paul Murphy, leader of the PwC Canadian mining practice. "Over 90% of all
deals involved transactions of US$250 million or less and the number of such
deals doubled in just two years from 2005 to 2007."
Three of the top 10 2007 deals had Canadians as acquirers and a total
value of US$10.2bn (12% of the top 10). Five of the top 10 deals had Canadians
as targets for a value of US$57.5bn (70% of the top 10). Canadian companies
were targets the majority were diversified (60%). When Canadian companies were
acquirers the majority were also looking at diversified (57%). However, a
significant move in the gold sector was the three-way deal whereby Yamana Gold
acquired fellow Canadian company Northern Orion Resources for US$1bn and then
both companies moved for US company Meridian Gold in a US$3.4bn acquisition.
The deals place Yamana Gold among the leading intermediate gold producers.
Much of the Canadian deal-making in 2007 took the form of mutual interest
consolidations and these, together with the LionOre deal, accounted for much
of the big increase in diversified deals. Teck Cominco's friendly US$3.9bn
purchase of fellow Canadian miner Aur added considerably to the company's
copper production and, in particular, to its copper reserves and resources.
The deal was an example of a diversified company, Teck Cominco, taking over a
company largely focused on one sector with over 90% of Aur's revenue derived
Another friendly all-Canadian deal saw two uranium miners merging to
create the world's second largest uranium producer with UrAsia Energy's
agreement to a US$2.9bn reverse takeover by smaller rival SXR Uranium One. The
deal enabled UrAsia to diversify away from an asset base that had been
concentrated in Kazakhstan.
When looking elsewhere in the world, deals for Asia Pacific mining assets
surged in 2007. Deal numbers were up by 72% from 368 in 2006 to 634 in 2007.
Total deal value rose 216% from US$11.2bn to US$35.3bn. There was a
significant increase in the number of big deals. In 2007, there were seven
US$1bn plus deals for Asia Pacific mining assets and a further eight US$0.5bn
plus deals. In contrast, in 2006, there had been just two deals above US$1bn
and no others above US$0.5bn. Intense competition for Australian mining assets
lay behind much of the deal growth, with foreign buyers attracted by the
politically stable environment and the potential to fill their resource
A big increase in deals for diversified assets in the Russian Federation,
combined with a step change in international expansion by Russian companies,
put Russia firmly on the mining M&A world map in 2007. Total deal value for
Russian Federation assets was up 16% to US$19.1bn in 2007 and Russian buyer
activity rose 66% to account for US$26bn of assets, up from US$15.7bn in 2006.
It was the size of the biggest deals rather than the extent of deal activity
that pushed up the totals. Two deals topped the list of purchases of Russian
mining assets: Rusal's US$13.3bn acquisition of a 25% stake in Norilsk Nickel
and Mechel Steel's winning US$2.3bn bid in the privatisation auction for
stakes in Russian coal mining companies Yakutugol and Elgaugol. In addition,
Russia's Norilsk Nickel's US$5.4bn all cash purchase of Canadian nickel miner
LionOre highlighted the importance of international expansion by Russian
There were big increases in deal numbers for assets in both Africa and
South America - up by 81%, from 52 in 2006 to 94 in 2007, in Africa and up by
51%, from 115 to 174 in South America. Of the two regions, Africa accounted
for the largest total deal value with US$13.5bn worth of deals, up by 38% from
US$9.8bn in 2006. South American total deal value rose slightly from US$8.6bn
in 2006 to US$8.7bn in 2007.
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