2011 M&A Will Be Increasingly Competitive


"The pace of deals in NA mining sector will quicken in 2011."

Merger and acquisition (M&A) activity in the North American mining sector will continue strong this year and could exceed 2010 levels.

Increasing competition to secure attractive, large deposits could result in more bidding wars, while spinning out and listing single mines and projects may also play an increasing role in shaping the sector.

"My sense is that the pace of deals will quicken in 2011," said John Turner, who heads the global mining group at Fasken Martineau.

"We are at a point in the cycle where winners are starting to become evident. . .people will be anxious to complete deals in a hot market," he said.

With share prices having risen across the sector, boards will be more willing to consider offers at a reasonable premium to their market price, he commented.

Concurrently, companies, especially larger producers with more financial muscle, are looking to secure resources and future production of key commodities that appear headed for supply deficits.

There is a good likelihood of big M&A action in 2011.

"For those larger companies, it is going to take significant deals to move the dial; so they are not going to bother with doing small exploration-type transactions," Turner said.

In a mid-September mining-executive survey conducted by KPMG, 70% of respondents said their companies were likely to pursue M&A activity in 2011, and 54% cited the need to increase reserves as the main driver for deals.

Corporate activity in the Canadian mining sector last year reflected the renewed availability of capital, opportunities and returning confidence versus 2008 and 2009, said Ernst & Young's Kellie Manchester.

While the number of deals was relatively flat in Canada from 20092010 (at around 1,000), the value of transactions in the industry rose almost 50%," she said.

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