Drought of deals reflects low commodity prices, low quality of assets on the block
Miners across the world want to sell off their mines, but they have a problem: Almost no one wants to buy them.
Some veteran bankers in the mining industry say they are seeing the longest drought of deals in their careers. The rut is caused by a commodity price rout with little sign of recovery, low-quality assets on the block and a focus on shareholder returns—not acquisitions—from industry giants like BHP Billiton PLC and Rio Tinto PLC.
Deal volumes in 2014 fell 23% to 544 from the previous year, the lowest amount since 2003 and the fourth straight year of declines, according to Ernst & Young. Deals during the past decade peaked in 2010, when 1,123 were completed amid a China-fueled boom in prices. In the first quarter of 2015, the value of mergers and acquisitions in the mining industry globally fell 18% to $5.9 billion, from $7.2 billion a year ago, Ernst & Young said.
The paucity of mining deals, amid a broadly roaring M&A market, comes as prices for commodities such as iron ore, aluminum and copper are trading at near six-year lows. Other metals like nickel and zinc are being weighed down by lackluster demand.