Mining deal value drops but M&A picks up

2019-03-05T08:47:22+00:00 March 5th, 2019|News|

The total value of all financial deals in the mining sector fell by 14.9% in 2018 to USD114-billion, according to GlobalData, a data and analytics company.

Primarily the result of a 32.4% decline in the global mining capital raising expenditure it was partially offset by a 13.5% increase in the value of merger and acquisition (M&A) deals.

The largest of the completed deals in 2018 was China’s Tianqi Lithium Corp’s acquisition of a 23.77% share in Chilean lithium miner, SQM, from Canadian fertilizer giant Nutrien, for a consideration of USD4.1-billion. SQM owns Chile’s only operational lithium mine, with Chile also having the world’s largest reserves of lithium – a high growth commodity given the rise in demand for lithium ion batteries for electric vehicles. This deal was followed by the Indonesian state-owned mining company, PT Indonesia Asahan Aluminium, offering of bonds, which raised USD4-billion.

Vinneth Bajaj, mining analyst at GlobalData says, “Out of 3 000 deals in 2018, the five largest were all worth over USD2-billion and accounted for a combined 15.8% of the global deal value, while there were an additional 60 deals ranging between USD500-million and USD2-billion, accounting for a combined 44.1% of the total value.”

China, Canada, Australia, the US and Indonesia were the five largest countries globally in terms of deal value, accounting for 65.2% or USD4.5-billion of the global total, according to GlobalData.

After increasing for two consecutive years, mining M&A and capital raising deal volumes declined by a collective 11.7% in 2018 as against 2017, and overall deal value fell by 14.9%. Major drivers behind the global downturn was a significant fall in capital raised through equity and debt offerings, alongside relatively lower acquisition rates.

Despite the fall in volumes, the total value of M&A deals did increase and, although small in comparison, both private equity and venture financing deal values and volumes rose in 2018. Overall, mergers and acquisitions accounted for 50.9% of the global deal value, while capital raising activities accounted for the remaining 49.1%.