In its annual report on mining deals, financial services group PwC said Australia was the place to be for mining M&A deals in 2009 with around $US15.6 billion ($A17.7 billion) or one-fifth of the world’s $77.1 billion in mining M&A deals originating in Australia.
The global financial crisis saw total deal values plunge more than 50% from the $153.4 billion achieved in 2008, while the average size of the deals fell 58% to $52 million during the same period.
Despite this, the number of transactions grew 16% year-on-year to 1937 deals in 2009 thanks to a jump in consolidation at the junior end of the market.
According to the report, 2009 also saw changes in the characteristics of both buyers and sellers in the market.
PwC global and Australian mining leader Tim Goldsmith said that while 2007 was remembered for its mining mega-deals, 2009 would be remembered as the year of the survivor and the opportunist.
“In years prior, miners were focused on acquiring assets for growth,” he said.
“This market dynamic changed with the onset of the global economic downturn. For many large and junior explorers, M&A became a necessity to repay debts or fund capital projects. These obligations, combined with a lack of alternate funding options, opened the door for cash-rich companies to acquire assets cheaply.”
Goldsmith also noted that deal values had been significantly smaller than previous periods.
“Many of the highest grossing deals in 2009 would not have made the top 10 lists of prior years,” he said.
Mining M&A activity was slow to begin with at the start of the year, but picked up gradually as liquidity and confidence returned to capital markets, with the highest deal volume and greatest deal value for the year posted in the fourth quarter, the report said.
Looking ahead, Goldsmith believes that while there will still be volatility, the return of the world’s major mineral consumers – China, Japan, South Korea and India – to the M&A market suggests the worst may be behind us.
“This year may signal a global race for resources and consequently an uptick in mining M&A,” he said.
Last year, the driver for M&As was to resolve short-term debt servicing and repayment difficulties, which is expected to be replaced in 2010 by a need for M&As to drive growth and expansion in the sector.
China accounted for 22% or $17 billion of mining deals globally in 2009, with Chinese entities responsible for three of the world’s 10 largest transactions, including the $2.75 billion takeover of Felix Resources and the $1.3 billion acquisition of OZ Minerals’ mining assets.
