London, England — MININGREVIEW.COM — 18 February 2009 – There is an increasing possibility that mining companies may face more unsolicited, potentially opportunistic takeover bids in 2009, as private equity and venture capital firms take advantage of the sector’s decline.
In a statement released here, Ernst & Young revealed that ‘The Mining Eye – the company’s index of the top 20 mining companies on the Alternative Investment Market (AIM) by market value – continued to decline, dropping 46% in the fourth quarter from the preceding quarter, and slumping 75% over 2008 as a whole. The index fell from record highs earlier in the year as metal prices and confidence in the mining industry collapsed.
Reuters quoted the report as showing that the number of companies delisting from AIM was likely to rise, while those unable to secure funding or attract investment from alternative sources would face administration. It noted, however, that gold producers and explorers might be able to raise capital due to the relative stability of the gold price.
The agency reported that gold had climbed 5% in 2008, while prices for base metals and diamonds had fallen as demand dropped.
During the course of last year, 21 mining companies delisted from AIM, and a further five companies were looking into delisting in the near future, according to Ernst & Young.