Although the mining industry’s struggles continue to persist, Canada maintained its dominant role in mining M&A activity in Q4 2014. According to a recent KPMG Mining M&A Quarterly Newsletter, the number of mining transactions in Q4 2014 matched that of Q3 2014; however, deal value rose by 61%, due largely to a single copper transaction that accounted for 26% of global deal value and placed Canada as the top acquirer of the quarter. Gold deals also factored heavily into the last few months of 2014, followed closely by coal and iron ore.
Overall, mining M&A ended the year on a strong note; however, M&A activity and deal value declined sharply in 2014 as compared to 2013. In 2014, deal value totalled roughly $27.3 billion, representing a 32% decrease from 2013. The number of announced transactions in 2014 totalled 101, representing a decline of 16.5% from 2013. In the Canadian context, total deal value increased by 4% in 2014 as compared to 2013, while the number of announced transactions fell by 33% from 2013 to 2014.
Copper leads the way
In the previous two quarters, copper M&A activity consisted of a number of smaller transactions that represented 17% and 15% of global deal value in Q3 2014 and Q2 2014, respectively. By contrast, the $2 billion copper transaction in Q4 2014 represented 26% of global mining activity and 62% of Canadian deal value in the quarter.
Gold holds steady
As was the case in Q2 2014, Canada played a role in every gold transaction in Q4 2014. On the global stage, gold transactions represented 17% of deal value in Q4 2014 and 28% of annual deal value while in Canada, gold activity represented 31% of Q4 2014 deal value and 63% of annual deal value. Other notable transactions occurred in coal (representing 15% of global Q4 2014 deal value) and iron ore (representing 11% of global Q4 2014 deal value) while smaller players, such as lead, zinc, potash and industrial sands played minor roles in Q4 2014.
Looking ahead to 2015
Due to the continuing decline in commodity prices and mining equities, the KPMG Report predicts that the focus within the industry will continue to shift from growth to value preservation, leading to restrained levels of M&A activity in 2015. The KMPG Report also noted that at least two of the larger Q4 2014 transactions relied heavily on private equity financing and flagged this as a trend to watch in the upcoming year.