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Three reasons mining M&A will strengthen this year

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World Coal,


A new report from Business Monitor International (BMI), a research firm, notes a pick up in M&A activity in the mining industry this year. While remaining a long way short of the boom times of the last decade, M&A activity will be stronger this year compared to last for three main reasons:

1. Low valuations

“A handful of larger miners with strong balance sheets will look to capitalise on the low valuations of mining firms through outright acquisitions,” said BMI with producing assets or material discoveries proving most attractive. According to Bloomberg, there have already been four unsolicited takeover attemps in the mining sector, valued at US$4.5 billion. This compares to US$594 million for the whole of 2013.

2. Pushing for operational efficiency

Achieving greater economies of scale will motivate some mining M&A activity this year with BMI citing Barrick Gold’s failed pursuit of Newmont Mining Corp.’s as falling within this category. That merger could have seen the companies achieve synergistic savings of up to US$1 billion in their complementary Nevada operations.

3. Chinese rush for overseas assets

BMI expects China to “continue to enhance its grip on overseas mines in order to plug the structural shortfalls in domestic production.” This will be helped by a new regulatory process that makes it easier for Chinese companies to get approval for outbound investment. 

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