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Global mining deals down 74% and not much hope for 2014

The value of global mining deals fell 74% to almost US$21billion in the first half of the year, and they are likely to remain equally bleak for the rest of 2013 and next year, a somehow predictable report published by PwC Thursday shows.

According to the firm’s Mining Deals report, the volume of mergers and acquisitions (M&As) plunged 31% in the six months from January to June, compared to the same period last year, as falling commodity and equity prices dented confidence.

But the authors don’t take the results as a bad sign. They highlight that despite they are less, takeovers and other transaction are still happening.

“Even with the industry facing a confidence crisis and large mining companies delivering little profitability, limited deals are still getting done,” said John Gravelle, Global and Canadian Mining Leader, PwC, in a press release.

“Traditional takeovers of entire companies are taking a back seat to joint ventures and spinoffs. Expect more of these non-traditional and creative deals to round out M&A activity during the second half of 2013,” Gravelle added.

PwC’s research also included some surprises, such as the fact that Russia and Kazakhstan took the top two spots for most active M&A by geography in the first half the year.

Russia, in fact, accounted for just over a quarter of deals, followed by Kazakhstan at 19% and the US with 11%.

Potash is hot

Potash is the one sector that could see an increase in M&A activity rather soon, since one of the two largest cartels has been dismantled, following Russian potash miner Uralkali’s decision to walk away from its marketing partnership with Belarusian Potash Corp, PwC said.

For other commodities the future looks quite lethargic way into 2014. Deals that do take place in the next six to 12 months, says the firm, will include companies that have enough cash to seize the opportunity and as their peers unload assets that aren’t considered a fit in this new cost-conscious environment.