While some companies have taken advantage of lower prices to pick up assets, the number of deals across the global mining sector fell by 31% in the first half of 2013 compared to the same time last year, which was already considered to be a slow time for deal activity. While majors continue to invest in their operations, projects have been deferred and capital spending has been curbed.
In addition, deal value fell 74% to US$20.6 billion between January and June 2013 versus the same period last year.
Market uncertainty and volatile commodity prices led to a slowdown in M&A activity from January to June 2013. While 2012 was considered a slow year for mining M&A, following a very busy 2011, this year is proving to be even tougher for deal making. With 649 deals in the first six months, deal volume is down by 31% from last year. The total value of deals also dropped significantly - down 74% from last year. So, as we titled our mid-year mining deals report, deals are in the dumps!
Welcome everyone! Joining Stephen and me for this session is Madison Pearlstein from our Corporate Finance group. She's done much of our research behind our mining deals reports. Ready for your questions!
The dominance of FSU activity in H1 was interesting but is that suggesting a difference between markets where NA seems to be caught like deer in the headlights whereas the rest of the world is willing to look beyond a few month horizon?
Given the current situation of mining industry, deals activity is down. What is your point of view for Chinese companies that are looking to enter into Africa and Latin America? Under this confidence crises and slowness in emerging market situation, How do you see mining companies financing options? Are Private Equity and Streaming companies will be next future for mining industry?
Chinese company perfer assets in Africa for many reasons. The financing for mining for top tear producer, media tear producer and exploration company will be quite different. It is hard to see use PE for all mining industry nest year.
Good question - we saw a lot more writedowns with the Q2 results. While writedowns don'f affect cash, I think they serve as a very good reminder for companies to be careful when considering valuations on deals in the sector.
There has been quite a bit of talk of the difference in value expectations between seller and buyers. Several high profile sales by majors have been cancelled or delayed, do you expect this trend to continue?