LONDON, Sep 16, 2010 (Dow Jones Commodities News via Comtex) --
The global mining sector is throttling ahead with 1,324 merger and acquisition deals worth $104 billion announced so far this year, PricewaterhouseCoopers said Thursday.
At the current rate, PWC forecasts the sector is on track to close the year at or near 2007's peak level of $159 billion, in contrast with the broader deal market where global volumes remain about 25% below peak levels, PWC said in a report.
The US and Canada in particular are the most active acquirers of mining assets, accounting for 49% of global mining deals from the start of the year to Aug. 15. Acquirers in Asia-Pacific, most notably China, accounted for 21% of all deals year-to-date, compared with about 10% a decade earlier, PWC said, adding most of those were strategic partnerships rather than 100% acquisitions.
North American companies were also the target of 43% of the deals announced so far in 2010 while Asia, Africa and the Middle East accounted for 35%, up 14% from 2000, PWC said.
Five key resources--gold, silver, copper, coal and iron--are dominating global mining M&A deals in 2010.
Gold was the clear front runner, accounting for nearly 40% of all deals by volume year-to-date. Copper was the next largest accounting for 16%, iron ore and coal were both at 7% and silver was 6% of total deal volume in 2010.
Miners with a significant presence in those five key resources accounted for 84% of all deals by value and 74% of all the deals by volume, PWC said.
By value, gold was also the clear front runner, accounting for 32% of deals. Silver was next at 17% followed by iron ore, coal, and copper at 13%, 12% and 10%, respectively.
"In light of the bullish price expectations for many metals, this activity isn't surprising," PWC said in its report. M&A activity has been driven by a desire to diversify across commodities and geography and replenish declining reserves.
Companies have also started to plow cash into other commodities including fertilizers and rare earth elements.
Mining Titan BHP Billiton Ltd (BHP) is currently pursuing a hostile $38.6 billion takeover offer for Potash Corp of Saskatechwan Inc. (POT) while Brazil's Vale SA (VALE) has spent $4.8 billion acquiring fertilizer assets throughout 2010.
PWC expects four deal trends to dominate the global mining sector for the remainder of 2010.
Scarcity for some commodities will cause M&A activity to intensify; private funds will likely re-examine the mining sector as one of the few "bright spots" in the global economy to invest in for the long term, and Australian M&A activity put on hold in the first half because of uncertainty related to the Australian Resource Super Profits Tax may resume in the second half. On the negative side, dollar volatility may create some concern for investors.