Perth, Australia — MININGREVIEW.COM — 08 September 2009 – Global mining mergers and acquisitions “’ which are down more than 50% this year “’ are set to recover in the first quarter of 2010 as metal prices surge on signs that the worst recession since World War II is easing.
“You are going to get a greater number of deals being done with the existing majors, and also with the mid-tier companies becoming majors themselves,” said Australia mining head at Deloitte Corporate Finance here, Eric Lilford. “By the end of first quarter of 2010, we will be looking at a stronger position overall for mergers and acquisitions.”
Bloomberg News reports that metal prices have surged 68% this year, prompting Bank of America, Merrill Lynch and Standard Bank Plc to flag more mining acquisitions. Takeovers are up almost a fifth this quarter from the previous three months, after Canada’s Eldorado Gold Corporation and China’s Yanzhou Coal Mining Company agreed to buy rivals in Australia “’ the biggest exporter of iron ore and coal.
The value of mergers and acquisitions in the mining, metals, coal, iron ore and steel sectors, has declined since US$187 billion (R1 500 billion) worth of deals were completed in 2007, according to data compiled by Bloomberg, as metals prices almost halved last year and the credit crisis curbed funding. There have been about US$19 billion (R152 billion) of proposed and completed M&A deals this quarter, compared with US$16 billion (R128 billion) in the second quarter.
The net debt of global mining companies peaked at US$93.5 billion (R748 billion) in 2007, the height of the boom, according to Citigroup Incorporated analysts led by Craig Sainsbury. This is forecast to drop to US$66.5 billion (R532 billion) this year and US$25 billion (R200 billion) in 2011 because of share and asset sales, dividend freezes and project cutbacks, the analysts said.