Gold is back to its former glory – at least in terms of global mining mergers and acquisitions.
In the first half of 2012, the precious metal unseated other resources such as copper, coal and iron ore for the top spot, according to a new report from PwC. The main driver: A decline in gold equity prices, which prompted action from mining companies who are looking for cheap ways to get their hands on new resources.
In total, there were 940 deals in the mining space from January to June, worth a total of $79-billion. However, much of that value stems from the pending takeover of Xstrata by Swiss-based Glencore, which tipped the scales at $53.6-billion. Deal volume was actually down, as there were 1,371 in the first six months of 2011 – although that was the busiest time on record.
Canadian mining dealmakers should get a pat on the back for making the country the top acquirer in the world, after the behemoth Glencore/Xstrata deal was taken out of the mix. Transactions by Canadian companies amounted to 16 per cent of global deals – 2 percentage points higher than those of the U.K., and 3 higher than those out of China.
But Canada shouldn’t expect that dominance to last. According to PwC’s assessment, China will likely increase the number of deals it does. The country already dominates the Asia-Pacific region when it comes to takeovers, and is expected to continue to expand its global reach.
However, China uses a lot of the resources it mines for manufacturing, and that sector was reported to have contracted for the eleventh straight month on Thursday (its purchasing managers index number hit 47.8). PwC observed that mining deals led by Chinese companies remained quite flat in the first half of 2012, while in the first half of 2011 the number of acquisitions soared.
As for the future: “Many miners are holding off on making acquisitions, due in part to tight credit conditions,” PwC said, nothing the part two of the year will likely resemble part one.