M&A activity rockets to $25bn in Q1 2018, latest EY report finds

The value of mergers and acquisition transactions in the global mining industry saw an increase of more than 80% in the first quarter of 2018, a new report form EY has found.

Transactions rose to $25bn during 1Q18, representing an 86% year-on-year increase. The biggest contributor for this increase, was the merger between Potash Corp and Agrium, two of the biggest potash operators in the world.

Looking closer at the M&A activities, there has been a shift in the focus of this investment. More companies have turned towards consolidation and strategic acquisitions, moving away from divestments for debt reduction purposes.

But, as potash played a key role in that increase other commodities reflect a different outlook across the world. Investment has stalled a little, with the volume of transactions decreasing by 16% year-on-year.
 

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EY believes this reflects a “wait-and-see mood” that is prevalent across the industry.

That being said, along with potash and aluminium, gold and coal activity was predominantly “buoyant.” These metals represented around 15% of deals value, with the gold sector in itself seeing around four transactions with a value in excess of $200mn.

“With stronger balance sheets across the sector, miners are increasingly returning to an investment-led strategy, which is driving a renewed focus on building portfolios that deliver sustainable shareholder returns,” said the report. “Inevitably, deals will continue to shift from divestment-led to investment-led with the key drivers being pipeline replenishment, synergistic volume growth and next generation mineral demand. Activist investors, meanwhile, will continue to shape miners’ strategies, affecting the choice of commodity portfolio and volume of ambition.”