Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The total value of overseas mergers and acquisitions pursued by the Middle Kingdom’s mining and metals players has surged this year according to an industry expert from Ernst & Young Global.
The China Daily says that the number of transactions pursued by Chinese mining and metal companies for the first nine months of the year rose by 10% year-on-year to 108 deals, while the total deal value surged a stunning 77% to hit USD$19.3 billion.
Mike Elliott, the global mining and metals leader for Ernest & Young, says this staggering rise in deal value is the result of concerted expansion by Chinese companies into region such as Africa, and that it represents an on-going trend as opposed to a mere spike in foreign acquisitions.
“This is really a repeat of the successful acquisition activity by Chinese buyer we saw in 2009 and 2010. We expect this success to continue into 2013,” said Elliott.
Weak share prices for overseas miners are a key factor enticing Chinese investors, many of whom are state-owned concerns with access to ample financing from the cash-flush central government, and who are inclined towards longer-term strategies.
Elliott expects more big deals in the next several years, which he says could present “once-in-a-decade acquisition opportunities, particularly in copper, iron ore and coal fields.”
