Global Mining, Metals M&A Activity Continues to Shrink

By Alex MacDonald

LONDON--Mergers and acquisitions activity in the global mining and metals market continued to shrink in the first quarter compared with the same period last year as buyers continued to fret over whether commodity prices will stay low for longer or fall further, a report published by consultancy firm Ernst & Young showed Wednesday.

Deal value in the three months ended March 31 plummeted 45% from the same period last year to $3.3 billion. Meanwhile, deal volume dropped 17% to just 72 deals. The top three deals were all divestments such as Barrick Gold Corp.'s (ABX) $610 million divestment of Bald Mountain and associated assets, and Rio Tinto PLC's (RIO) $617 million sale of its 40% stake in the Bengalla Coal joint venture.

"Prolonged commodity price volatility, widespread financial distress and subdued investment appetite continues to take its toll on transaction activity in the mining and metals industry," said Lee Downham, EY's global mining and metals transactions leader.

"These forces aren't driving the value or volume of deals expected at the outset of the year. Instead, we're seeing greater restraint as companies wait to see whether we've finally reached the bottom of the market."

Gold deals comprised over half of the first quarter's deal value at $1.7 billion and 46% of the volume at 31 deals. Coal and steel were the next biggest deal sectors, accounting for $735 million and $568 million of the deal value, respectively.

The global mining and metals market raised over $60 billion in capital during the first quarter, unchanged year-over-year but down 24% compared with the fourth quarter of last year.

Market volatility, wider concerns about U.S. monetary policy and the pace of economic slowdown in China significantly reduced equity listings, with first-quarter follow-on offerings declining 59% year-over-year to $3.4 billion and primary listing activity remaining stagnant at a low level of around $70 million.

Loans picked up 38% from a year earlier to $26 billion while bond issues dropped 5% to $32.8 billion in the first quarter.

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(END) Dow Jones Newswires

May 11, 2016 11:21 ET (15:21 GMT)

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