Deals continue to decline globally overall
compared to 2013, says EY
TORONTO, March 2, 2015 /CNW/ - In 2014, Canada was the most prolific buyer of mining
and metals assets in terms of volume, and a close contender in
terms of value. Despite that, overall deals globally continued to
decline on both a volume and value basis in the sector compared to
2013.
"A few big deals in Canada in
2014 put us at the top in terms of deal volume," says Bruce Sprague, EY's Canadian Mining & Metals
Leader. "But the reality is that the majority of the deals were
junior-level strategic mergers aimed at conserving cash."
According to EY's Mergers, acquisitions and capital raising
in mining and metals: 2014 trends, 2015 outlook, Canada had the top gold deal in 2014, with the
joint acquisition of Osisko Mining Corp by Yamana Gold and Agnico
Eagle Mines for $3.6b. The next
largest gold deal was the UK's Polymetal International's
acquisition of Kazakhstan's
Altynalmas Gold (Kyzyl gold project) for $619m.
"Gold remains the most-targeted commodity by volume," says
Sprague. "We saw that play out right here in Canada. The majority (88%) of gold deals,
however, were valued at less than $50m, reflecting distress among gold juniors on
the back of squeezed margins."
Still, in its outlook EY says long-awaited funding from private
capital funds should begin to deploy across the sector as sellers
align their value expectations with the market, and assets continue
to be sold by the large cap producers in search of optimum
portfolios.
"The deals we're seeing now are a lot of mergers between equals
and consolidation opportunities benefiting both parties," explains
Sprague. "The large cap producers are more focused on looking to
either sell or spin off non-core assets."
EY says current market conditions are putting mining companies
in a quandary – investing for the next stage of growth is
potentially unpopular with shareholders, but it could prove to be a
masterstroke if they want to fully capitalize on the next uplift in
the cycle.
"For the past few years, companies have been focused on
cost-reduction programs, internal capital allocation and
productivity measures," notes Sprague. "Moving forward, they need
to have a broader focus on total shareholder return and make
capital decisions that will support long-term value creation."
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SOURCE EY (Ernst & Young)