Speaking to journalists at a pre-Mining Indaba conference call, Kohli said M&A declined for a third consecutive year as a large gap between buyer and seller expectations was maintained, but the boards of mining companies would likely become more flexible in response to continuing financial pressures.

“The equity tap is highly selective and in fact turned off for all but the most robust companies, the ones with the best assets and with a track record and strong management. Debt markets are available but they’re expensive … especially for junior mining companies,” he said.

“Because of those funding challenges, we expect there to be more M&A this year – not necessarily more deals being closed, but we will see more deals being announced.

“CEOs and boards of mining companies will feel the financial pressure. They’ll be running out of cash. They’ll feel their cash flows are coming off because commodity prices are low. [They’ll be] finding it quite hard to refinance or to raise the funding.

“[They will] have to look at other ways to create value and to grow the business. The way to do that is through merger activity: to undertake a joint venture … through to a full-scale public merger.”

M&A activity in the global mining industry peaked in 2011 with 1008 deals worth a combined $US162 billion ($A208.67 billion), according to Standard Bank’s data. In the three years since, those figures have fallen to 941 deals worth $104 billion, 702 deals worth $87 billion, and 544 deals worth $45 billion.

Africa – the focus of next week’s Mining Indaba conference in Cape Town – saw the announcement of four deals worth more than $100 million in 2014: B2Gold’s $507 million acquisition of Papillon Resources, Exxaro Resources’ $472 million acquisition of Total Coal South Africa, China Uranium Corporation’s $190 million acquisition of a 25% interest in Paladin Energy’s Langer Heinrich operations in Namibia, and QKR’s $110 million purchase of AngloGold Ashanti’s Navachab mine.

Kohli said the trend in Africa mirrored the industry as a whole, but Chinese firms would lead a new rush of M&A deals on the continent – reversing a muted year in 2014 in which it participated in about 30% of all African deals.

“We have a very strong relationship with China at a corporate level, and we anticipate, having spent quite a bit of time there in the last few months, that there will be a pick-up in interest and also activity in Chinese companies now looking to target African assets and to invest in African businesses,” he said.

Chinese interest in overseas investment dipped in 2013 with the selection of new national leadership, according to Kohli. But he said lower valuations had caused Beijing to once again search for assets overseas – and named coal, copper and gold as the three commodities to which they are most attracted.

Meanwhile, Kohli said, China is encouraging its companies to export other strengths, so expect to see them providing more services to the African mining industry – such as engineering, procurement and construction.

The other trend he predicted for the African and global mining industry in general was an increase in the involvement of private capital, ranging from sovereign wealth funds and family offices to private equity groups.

“We’ve seen a lot more interest in the past 12 months from private capital; indeed QKR buying into Navachab, that was an example of a private capital transaction. We can expect private capital to play a more meaningful role this year, including in Africa, because the valuations frankly have moved in their favour, and they have capital to offer which is not easily available from other sources,” he said.

Only a modest recovery in equity issuance was seen globally in 2014, according to Standard Bank. It counted 43 African-related equity transactions last year with a combined value of about $1 billion, of which 12 were worth $25-to-100 million and four were worth more than $100 million.

The four largest transactions were: Aquarius Platinum, $235 million to repay debt; African Barrick Gold, now Acacia Mining, $188 million through Barrick Gold sell-down; Ivanhoe Mines, $139 million for project financing and general corporate purposes; and Platinum Group Metals, $114 million for research and development and working capital.

From a company perspective the aim was to restore balance sheets, Kohli said.

“If the capital structure is looking a little too debt-heavy or if there’s too little equity on your balance sheet, when you don’t have conventional means of achieving that then you look at other ways to do that,” he said.

“The environment remains somewhat subdued of course, but what we shouldn’t ignore is that the essential narrative of Africa remains intact.

“It’s still a growth story. It’s still relatively attractive compared to other mining jurisdictions in the world, but if there’s a period of inflection right now because of macroeconomic forces. Because it’s a cyclical business it will return – just not this year.”

By Nadav Shemer, assistant editor of affiliated publication Mining Journal.