PwC: Market volatility leads to more subdued mining

By Rob Starr, Content Manager, Big4.com

According to PwC’s new Mining Deals report launched recently, Global economic uncertainty and a drop in commodity prices has led to marked slowdown in merger and acquisitions (M&A) in 2012, despite the blockbuster start with a Glencore/Xstrata transaction.

In the first half of 2012, global mining M&A deal volume fell more than 30% to 940 transactions, compared to 1,371 for the same period in 2011. The total value of deals for the first six months of 2012 was $79 billion, slightly higher than $71 billion for the same period a year earlier, but includes Glencore International plc’s $53.6 billion offer for Xstrata plc. Excluding that deal, the total value of transactions announced drops to $25 billion, one-third of last year’s first half-year total, reflecting global market uncertainty.

Gold dominated M&A transactions in the first half of 2012, re-establishing its first-place position against other metals such as copper and coal, whose values have fallen while the price of bullion remained steady. It represented the highest value of transactions at 26% and the highest volume at 29%, excluding the Glencore/Xstrata deal.

“Short term demand growth has reduced as China slows and the European economy struggles. The major industrialisation of the emerging world is still in its relative infancy but is the driver of the ‘super cycle’. Commentary around the death of the mining boom has been over stated and those with long term trends in mind will be able to buy bargains for the next little while,” says Tim Goldsmith, global mining leader, PwC.