EY: Mining Executives Expect Increased M&A Activity In Next Year
(Kitco News) - Merger-and-acquisition activityin the mining sector is likely to pick up in the next year, said theconsultancy EY in a report Thursday.
The firm’s 19th Capital ConfidenceBarometer shows that 58% of global mining executives say they intend to pursuemergers and acquisitions in the next 12 months, compared with 46% across allsectors.
Third-quarter deal value rose 25%from the prior quarter to $16.8 billion, and the 115 deals was a 15% increase,EY said. Still, the firm described mining companies as cautious about mergersas they continued to focus on balance-sheet stability and returning cash toshareholders. This was reflected by a decline in capital raised, which fell by22% during the quarter to $50.2 billion.
“In the third quarter of 2018,mining and metals companies continued to tread carefully in their approach todeal-making and capital allocation,” said Lee Downham, EY’s global mining andmetals leader for transactions. “Geopolitical instability, including ongoingtrade turbulence, has compounded the sector’s focus on optionality acrossexisting projects and a reluctance to execute higher-risk capital investments.But this approach will eventually have to shift more toward an investment-ledstrategy across the industry, with the potential for acquisitive growth.”
EY said the autumn announcementthat Barrick Gold Corp. (NYSE, TSX: ABX) will acquire Randgold Resources Ltd.(Nasdaq: GOLD) for $6.5 billion could influence other industry participants toaim at increased volume through mergers and acquisitions.
The EY report said that 74%global mining and metals executives say that they expect the M&A market toimprove in the next 12 months, up from 53% last year. Further, 52% say thattheir M&A pipeline will increase in the coming 12 months, compared with 34%a year ago. Sixty percent also expect to see an increase in the number ofcompleted deals, almost double last year’s response rate of 34%.
“While we have seen somecompanies looking toward measured growth through joint ventures and strategicpartnerships, and there has been a notable acceleration in battery metals dealsinto the second half of the year, deal-making has remained sluggish,” Downhamsaid. “The latest Capital Confidence Barometer indicates that caution could nowbe lifting, and 2019 may well see the sector enter a new phase, marked byacquisitive growth and bolder deal-making.”
By Allen SykoraFor Kitco News
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asykora@kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. |