VANCOUVER - According to information compiled by Ernst & Young, the value of mining and metals deals involving Canadian companies in the first half of 2011 was double what it was in 1H 2010. Canadians made more acquisitions (196) than Australians (83). Canada was also the leading target destination (129), and Australia was again second (72).
"So far, 2011 has brought fewer but larger deals to the global mining sector," says Tom Whelan, leader of Ernst & Young's national mining and metals practice. "Despite the drop from 573 deals in the first half of 2010 to 511 deals in the first part of this year, the total deal value of mining transactions from January to June more than doubled to US$96.3 billion from US$47.9 billion."
Average mining company debt is at an all-time low while cash flow and profitability are at an all-time high. These factors, coupled with increased demand for natural resources in emerging markets, are contributing to an uptick in deal activity.
The number of mining and metals sector IPOs globally was up 30% to 73 in the first half of 2011 from 56 in the first half of 2010. Total IPO proceeds were up 107% to US$13 billion from US$6.3 billion, dominated by the US$10 billion Glencore listing. Strong cash flows and increased demand from shareholders for returns also drove more than US$17 billion in share buybacks.
Whelan adds that while deal activity is stronger than last year, transactions levels still fell short of industry expectations. Although the pace of deal making is set to increase in coming months, uncertainty still lingers around mergers and acquisitions.
Tom Whelan may be reached in Vancouver at 604-891-8381 or visit www.EY.com.
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