Heightened M&A activity: survey

A SURVEY by MinesOnline of Diggers & Dealers delegates in Kalgoorlie this week found that almost 90% were expecting an increase in deals over the next 12 months.
Heightened M&A activity: survey Heightened M&A activity: survey Heightened M&A activity: survey Heightened M&A activity: survey Heightened M&A activity: survey

Diggers & Dealers

Kristie Batten

According to the MindsOnMines survey, 48% of respondents expected merger and acquisition activity and asset acquisitions and divestments to increase significantly over the next year, with a further 39% tipping a slight increase from current levels.

Just over 40% expected more deals at the junior end of the market, as seen recently with the tie-ups of Minotaur Exploration and Breakaway Resources, as well as Southern Cross Goldfields and Polymetals Mining.

Of that 42%, 32% said they expected asset divestments by the majors to be the most common form of M&A to occur in the sector.

An analyst told MiningNews.net during the conference that many companies seemed willing to do deals.

A total of 61% of respondents said difficulties in accessing capital would be the leading reason behind potential transactions, while 23% said discounted asset valuations would be a factor behind acquisitions.

Liam Twigger, managing director of MinesOnline and its parent company PCF Capital Group, said the results of the survey reflected the current conditions in the mining industry.

“We are now at a stage in the cycle when the majors are looking to rationalise their portfolios and sell underperforming assets at a time when price expectations are at long terms lows,” he said.

“This presents excellent buying opportunities for juniors who can secure growth assets using scrip, royalties and deferred payments to limit upfront cash, whilst also re-setting cost structures and delivering the much needed profit margin that eluded the seller.”

Meanwhile, the survey also found that local investors had abandoned the sector, leaving Asian and other overseas investors to plug the gap.

A total of 70% of people surveyed thought Australian retail and institutional investors were currently the least interested groups in investing in local mining and exploration companies, with more than half or 51% of those surveyed identified retail investors as the least interested investors.

About 43% of respondents tipped Asian strategic investors to be the most likely source of capital for Australia’s mining sector, with a further 23% identifying offshore institutional investors as the next most likely source.

“We have seen substantial investment in Australian mining assets by large Chinese state-owned enterprises in the past decade however in recent times this has started to slow,” Twigger said.

“The next wave of investment from China is likely to come from private equity groups and wealthy individuals who are seeking to diversify their portfolio beyond traditional asset classes like property.”

The biggest issue facing Australia’s miners, according to respondents, was improving productivity/reducing costs, while difficulty accessing capital was identified as the second most pressing problem, with two issues achieving 38% and 36% of votes respectively.

MindsOnMines participants also overwhelming said they believe the outcome of the upcoming September 7 federal election would have an impact on investor sentiment towards Australia’s mining sector, with 46% tipping a significant impact.

A total of 60% disagreed with Prime Minister Kevin Rudd’s declaration that the China-driven resources boom was over, while 25% agreed.

Most read Archive


Most read Archive