Miners Drill for M&A Deals in Emerging Markets


"Global mining acquisitions have more than doubled in value this year."

Mining takeovers, heading for the second best year on record, are shifting to the emerging markets of Africa and Asia as BHP Billiton Ltd., Rio Tinto Group and Xstrata Plc look to seal cheaper deals in less-explored areas.

As prices for most commodities rise, global mining acquisitions have more than doubled in value this year to $132 billion.

BHP and Rio lead a list of possible buyers as the top eight miners generate an estimated $132 billion in earnings next year, according to Sanford C. Bernstein & Co. Coal. Copper and gold are favored, with Africa a "hotspot," said Mark Carlile, head of resources investment banking in Australia at Credit Suisse, this year's top ranked adviser on emerging-market mining deals.

The mining industry's capital flows to the Middle East and Africa have more than doubled to $7.7 billion this year, Bloomberg data show.

"Almost by definition there are more resources that can be found in less developed countries than developed countries" because of less exploration, said billionaire Ken Fisher, who oversees more than $38 billion at Woodside, California-based Fisher Investments Inc.

Producers can pick up assets more cheaply in developing nations based on lower reserve and resource cost multiples, Greg Fournier, head of Asia Pacific metals and mining investment banking at Merrill Lynch, the number three adviser, said in an interview.

Mergers and acquisitions are a faster, cheaper route to production than constructing projects from scratch, Standard Chartered Plc said in an August report. The cost of building a copper mine has more than doubled in the past five years.

"Is it cheaper to put in new stuff today or buy stuff? Where is there less risk?" said Fisher, who is "overweight" in emerging markets and mining stocks. "My view is there is less risk in buying."

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