The ideal destination for mining deals
Article by Skymaggie
Australia accounted for some 22% of merger and acquisition (M&A) market share value in 2011, but the position as a popular destination for acquisitions became harder to maintain, as the country competed with Africa and other growth markets, PricewaterhouseCoopers (PwC) reported this week.
Australia, the US and Canada dominated global deal making, accounting for some 53% of the yearly acquisition value, up from the 46% the previous year.
On the sell side of the ledger, Australia was ranked second, with 20% of market share, second only to the US.
“Australia would have taken out top ranking on both the buy and sell side of global deal making if several major, and probably anomalous deals, had not propelled the US into the top sales destination,” PwC’s energy, utilities and mining leader, Jock O’Callaghan said.
The year was marked by strong activity in the upper and lower echelons while the midtier remained largely on the sidelines. Seven deals topped the $ 5-billion mark, 1 355 deals worth less than $ 100-million were struck at the lower end while midtier deals retreated 6% to 25 transactions worth $ 17-billion.
Globally, more than 2 600 deals, worth $ 149-billion, overcame economic weakness, falling commodity prices and declining share prices to make the year the second busiest in history.
O’Callaghan said that volumes were close to historic highs and values were up 33% on 2010, almost double the year before.
Penetration in growth markets, which includes Africa, Latin America and parts of Asia, has jumped from less than 1% at the start of the millennium to now account for almost a quarter of acquisitions in value, and almost one in five in volume.
O’Callaghan said that growth markets were increasingly the force to be reckoned with in global mining. In addition to housing most of the world’s population, growth markets also boast roughly 75% of the world’s known reserves. This included the vast bulk of the world’s crude iron-ore, gold and copper reserves.
Yet companies in developed western economies were opting for a “buy local” M&A strategy in preference to expanding their geographic reach into growth markets, PwC said. Likewise, those based in growth markets also favour growth in their own regions.
The advisory firm noted that 64% of Australian-led acquisitions involved other Australian projects while 91% of growth market acquisitions involved early stage projects in other growth markets.
O’Callaghan said the data pointed to a looming and fundamental shift in mining that would reshape the sector’s geographic reach and its commercial structure, triggering a major rethink on how the west engages with frontier markets.
“The shifting centre of gravity, from the west to the east will increasingly challenge the traditional fundamentals of mining M&A and compel Western entities, especially boards and shareholders, to realign their protocols around balancing risk and reward,” he said.
“Western “uber miners” will need to retool if they expect to compete successfully with the might of State-backed sovereign wealth funds, private equity and other similar entities. These new mining moguls will be characterised by their deep pockets, long investment time frames and their expertise in emerging markets.”
Looking ahead, PwC forecast new records in M&A volumes during 2012, stating that with the sector sitting at more than $ 100-billion in cash, pent-up demand for new projects, rising costs and declining reserves, miners would be seeking new targets to build scale.
It was predicted that Africa would continue to emerge as one of the most important markets for M&A, with strong resources potential and an increasingly investor-friendly climate seen as the two key drivers highlighting the continent as a popular mining destination.
It was further predicted that while the value of gold equities was lagging the escalating price of gold, a flurry of M&A activity in the gold sector was likely during 2012.
Henan Hongxing Mining Machinery Co., Ltd is a joint-stock mining machinery manufacturing enterprise integrated in scientific research, production and marketing. It is located at the High & New Technology Industries Development Zone of Zhengzhou,China with an area of 50 thousand m2 which includes 15,000 m2 of standard heavy duty industrial workshop. Equipments are more than 160 pieces, including large and medium sized metal processing, riveting and installing equipments. There are more than 660 workers including 80 administrators with secondary and senior occupational titles and engineering technicians. In order to promote the competitive strength, the advanced technologies have been introduced from America, Germany, Japan and Australia, which established the international advanced production line, first-class modern testing base as well as research centers of sand maker, mill and mine-selecting equipment. Scientific management, advanced processing technology and innovative manufacturing theory make the company become the mining machinery manufacturing and exporting base in China.In addition the company is the production: Henan ball mill, Henan washing machine, Henan sand washing machine, Henan processing equipment, Henan vibrating screen and the dryer production factory, the red star machinery factory, Raymond home depot. The demand of the market is our constant innovation of power and the foundation.
In addition the company is the production: Henan ball mill, Henan washing machine, Henan sand washing machine, Henan processing equipment, Henan vibrating screen and the dryer production factory, the red star machinery factory, Raymond home depot. The demand of the market is our constant innovation of power and the foundation.