Deep sea mining puts $560 billion in land extraction at risk — report
Even in optimal scenarios, the activity would generate only $6.25 million in tax revenue for countries involved, says Planet Tracker.
Escalating costs and economic instability may be the two main reasons why mining companies worldwide are acquiring existing projects instead of starting their own, shows the latest report from global firm Ernst & Young.
According to the firm’s Global Mining & Metals Transaction Leader, Lee Downham, capital that has been earmarked for organic projects is increasingly under review as returns no longer compare favourably to mergers and acquisition, particularly in the past six months.
Many miners have built up strong balance sheets and this, together with lower valuations and expectations of robust long-term commodity demand, is creating “an attractive environment for M&A,” the study says.
“Synergistic and ‘one chance’ deals continue to be undertaken, while more speculative deals are being deferred,” Downham says. “Those companies with a bullish outlook on China, and that can work with volatility, will be the dealmakers this year,” he adds.
There were a total of 470 deals committed globally at a value of $55.7 billion during the first half of 2012, down 19% and 38%, respectively, on-year, the report shows.
But the study also shows there was a robust increase in the number of “mega-deals,” worth $1 billion-plus, which rose by one-third, to 20.
China and Australia dominated deal activity in the first-half of the year.
Beijing-based companies acquired domestic and cross-border targets in deals worth $17 billion.
Australia was the second main protagonist of mining deals, largely driven by consolidation among domestic coal companies.
There has been a wave of deals in Australia’s coal industry over the past two years, including Rio Tinto Ltd. (LON:RIO) and Mitsubishi Corp.’s decision to take full control of Coal & Allied Industries Ltd., as well as Peabody Energy Corp.’s (NYSE:BTU) acquisition of Macarthur Coal Ltd. (PINK:MACDF).
Ernst & Young is a global leader in assurance, tax, transaction and advisory services.
2 Comments
Southpen
US Silver Corp. ,a 2.4 million oz /year silver producer with no debt ,25 million in cash and several years of reserves is for some very strange reason merging with a tiny producer of gold and silver with no reserves,no mill,8 million in debt and only an assured 2.5 years of resources.
I appeal to any gold or silver miner out there to consider making a counter offer to US Silver shareholders.Our share structure is 62 million outstanding and about 68 million fully diluted.Our cost per oz is a little high but we have a talented work force and need a new management that can appreciate the value to themselves and their company as well as us,the common shareholders.
Jackson Sikamo
Yes, mega deals are happening increasingly mainly for consolidation and for alignment. At the same time it is worth noting that exploration expenditures in almost all the major mining regions is increasing (AIME – Mining Engineering May 2012 issue) except the USA. Most of this increased explorartion is being done by the so called start up junior mining companies. Most of these do not have capacity, financial and project management, to follow through their finds and therefore end up selling on. This is common practice in all mining regions.