HomeBase MetalsHealthy pipeline of new mining flotations next year

Healthy pipeline of new mining flotations next year

On the floor at
the LSE “’ new flotations
expected next year
London, England — MININGREVIEW.COM — 01 December 2010 – A sharp rebound in metals markets will feed a healthy pipeline of new flotations and spin-offs in the international mining industry next year while banks are lending more for mine projects.

“I would expect some multi-billion, FTSE-100 mining companies to come to market at some point next year,” Lee Downham, a partner in the mining division of accountancy group Ernst & Young, told the Mines & Money conference here.

“Mergers and acquisitions activity will also pick up as companies look to spend cash from profits, which are due to hit an overall record in the sector this year,” he added. “Huge takeovers are likely to be rare, with most activity in bolt-on acquisitions,” said Downham.

He predicted that M&A would be quite ‘sticky’ as smaller firms held out for better prices. “We believe that the diversified’s and mid-tiers will want to do acquisitions, but there won’t be too many willing sellers right now.”

Reuters reports that buoyant metals prices, driven by heavy demand from China, are boosting cash flows, which until now most firms have used to slash debt burdens.

“The top five mining groups “’ BHP Billiton, Rio Tinto, Vale, Anglo American and Xstrata “’ have cut their collective debt levels by 48% since the end of 2008,” Downham said.

“More money is also available for building new mines from mining firms’ own cash flow and also from bank loans. Many new mine projects were delayed during the financial crisis as banks tightened credit flows, but that has loosened up,” he continued.

“Mining project finance value levels of around US$8 billion (R56 billion) so far in 2010 are already higher than in any of the five previous years,” Vaughan Wickins, who is in project finance at Standard Bank, told the conference.