Canadian Mining Journal

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CANADIAN MINING PERSPECTIVES: Mining M&A numbers race upward

Merger and acquisition activity in the world's mining industry shows no sign of slowing down despite the credit cru...


Merger and acquisition activity in the world’s mining industry shows no sign of slowing down despite the credit crunch originating in the United States. So says ERNST & YOUNG in its latest report “2007: The Year of the Hunters and the Hunted.”

E&Y found that almost 90% of the world’s largest mining companies still expect to grow through acquisition in the next two years.

CMJ readers will be familiar with the biggest deals and proposals. They have followed the sagas of BHP and BILLITON, XSTRATA and FALCONBRIDGE, VALE and INCO, VALE and XSTRATA, RIO TINTO and ALCAN, BHP BILLITON and RIO TINTO, not to mention TECK COMINCO and a number of juniors (and Inco, briefly). As well there are dozens of smaller agreements each month, enough that if we reported all of them, we might be called “Canadian Merger Journal”.

The numbers are very large. And here are some more numbers from E&Y:

– There were 36 mining deals, each valued at $1 billion or more in 2007. Together they totalled $167 billion. Canada was the target for 13 of these transactions, accounting for 35% of the megadeals or $72 billion of the value.

– Only 4% of the deals last year were valued at over $1 billion, but they represented 79% of the value of the transactions.

– Last year 89% of the deals were worth less than $200 million each. They added up to only 7% of the value. Activity in Australia, Canada and the United States amounted to over 50% of these deals.

– A total of $15 billion was raised in Canada, the United Kingdom, the United States and Australia through initial public offerings. The IPOs in these four countries represented 73% of the money raised and 83% of the number of deals.

Moreover, with the disappearance of Inco, Alcan, Noranda and Falconbridge from the Canadian stock exchange, Canadian mining investors have fewer opportunities to participate in the home-grown industry. The shortage will lead to the rise of new entrepreneurs who will find a way to take advantage of it, according to the report.

The E&Y report was based on interviews with 70% of the top 40 global mining and metals companies. The authors concluded that the mining sector is confident boom times will continue.

An executive summary of the report may be read at www.EY.com.