Canada led the world in the number of mining mergers and acquisitions (M&A) for the first half of the year, says Ernst & Young. And while the number of deals fell in comparison to the highly acquisitive first half of 2010, the value of the transactions that took place this year more than doubled compared to the same period last year.
The country was the leading buyer in H1 with 196 deals, and also the leading target destination with 129 deals. Australia came second as a buyer and target destination, with 83 and 72 deals respectively.
The Montreal Gazette said coal was the hottest dealmaking sector, "and continued to steal headlines with Peabody Energy's and ArcelorMittal's joint $4.8-billion bid for Australia's Macauthur Coal." The paper also quoted Tom Whelan, leader of Ernst & Young’s national mining and metals practice, saying that copper will be "the real story" to watch considering the volatility of the metal.
Despite the drop from 573 deals in the first half of 2010 to 511 deals in H1 2011, the total value of mining transactions from January to June more than doubled to US$96.3 billion, from US$47.9 billion in the first half of 2010. Mining and metals IPOs were up 30% from last year, with proceeds up 107% to US$13 billion, led by the US$10 billion Glencore listing.
Strong cash flows and increased demand from shareholders for returns also drove more than US$17 billion in share buybacks, said E&Y.
The global consulting firm said miners are cashed up and carrying low debt loads, which contributed to the uptick in dealmaking activity, along with increased demand for natural resources in emerging markets.
The Gazette noted that companies are tending to target mergers and acquisitions in more stable countries like Canada and Australia this year, compared to last year, when high commodity prices had buyers making acquisitions in frontier regions like Africa.