The figures revealed an 18% drop in the total value of completed global merger and acquisition deals to $US5.9 billion ($A7.5 billion) in the first quarter of 2015 compared with the corresponding period in 2014, while volume almost halved to 79 deals.

In Australia, 17 deals were completed in the first quarter of the year for a total value of $125 million, a decrease of 26% and 52% respectively on the final quarter of 2014.

EY Australia mining and metals transaction leader Paul Murphy said the figures reflected the post-boom restructuring phase of the industry, and that there was an increasing strategic imperative to do deals which was setting the scene for new competitors and diverging business models.

However, he said merger and acquisition decisions needed to be made on a commodity-by-commodity basis.

“Weak and volatile pricing the past 1-2 years has been a supply side issue for most commodities and the timing of recovery will be different for each,” he said.

“Base metals are closer to an uptick in terms of supply and demand balance, while structural supply issues remain for many of the bulk commodities.”

Murphy said cost-cutting and productivity improvements across the industry in the wake of lower commodity prices meant that cost-curves were rebasing to a new normal.

“Add to this the lower Australian dollar, energy cost reductions and freight rate reductions and it means the industry in Australia will be able to sustain production at much lower commodity prices than they have during the boom phase and the immediate aftermath,” he said.

He said confidence among perspective buyers that cost reductions and productivity improvements were real and sustainable was growing, meaning commodity prices were key to acquisition decisions.

“The major variable then becomes commodity price and there are still differences on the outlook for commodity prices and the value sharing between potential buyers and sellers for the introduction of fresh capital,” he said.

“So understanding the supply and demand dynamics of the specific commodity becomes more important in assessing the economics of potential acquisitions.

“There is no doubt at the moment that iron ore commodity pricing is heavily influenced by the supply side resulting from the boom-driven investment decisions.

“The same cannot be said for some of the base metals commodities such as zinc and nickel which are sitting at the other end of the cycle and face declining supply and less volatile demand.”

EY’s statistics showed financial investors accounted for 28% of global demand volume and 46% of Australian deal volume in the first quarter of 2015, though investment bases remained low.

While capital investment fell 17% last quarter to more than $40 billion compared with the previous corresponding quarter in 2014, Murphy said growth in adjusted cost bases was likely to bring more financial investors in the market.

Looking forward, of 63 mining and metals respondents surveyed as part of EY’s Global Capital and Confidence Barometer, 49% said they expected to actively pursue an acquisition in the next 12 months, while the same number expected the merger and acquisition market to improve.

Earlier this week, Independence Group announced it would acquire nickel producer Sirius Resources under a deal valuing the latter at $A1.8 billion, while Evolution Mining announced it would acquire Barrick Gold’s Cowal mine in New South Wales for $US550 million.