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Weak commodity prices, a wave of CEO firings and more than $60-billion of writedowns have slowed mining M&A activity to a crawl. And almost no one thinks it will rebound anytime soon.
A new study from PricewaterhouseCoopers LLC (PwC), to be released Thursday, details the damage. There were a total of 649 mining deals in the first six months of 2013, according to PwC, down 31% from the same period a year ago. And deal value plunged 74% in that period to US$20.6-billion.
The poor result is no surprise given recent market conditions. But it highlights just how much things have changed since the M&A frenzy of the last decade fizzled out. At times, multi-billion-dollar takeovers were routine.
Many of those deals backfired over the last couple years due to rising costs and falling metal prices, which forced companies to delay or cancel projects and record billions of dollars of writedowns. Barrick Gold Corp. reported US$9.3-billion of impairment charges last quarter alone. Nearly every senior mining company has replaced its CEO since the frenzy ended, and not surprisingly, the new group has a much more negative attitude towards takeovers.
“They’re looking at what happened to the last guy and saying, ‘Do I want to go and take a chance on an acquisition, knowing what the repercussions are if it doesn’t work out?’” said John Gravelle, global mining leader at PwC.
Inasmuch as large deals are happening, they have moved outside Canada and into emerging markets. The largest transaction in the first half of 2013 was Russian billionaire Mikhail Prokhorov’s US$3.6-billion sale of his stake in Polyus Gold International to two other billionaires.
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