SNL report: Copper dominant in 2014 mining acquisition activity

The following report, Signs of Life in Mining Acquisitions, was released by Virginia-headquartered SNL Metals & Mining. For more information, please visit www.snl.com.

Last year we saw a welcome improvement in mining asset transactions, with SNL Metals & Mining recording 73 acquisitions that were individually valued at more than US$10 million. In a recent report, Base Metals and Gold Acquisitions Activity, 2005–14, SNL calculates that these deals totalled US$21.6 billion, compared with US$11.9 billion in 2013. Despite the near-doubled year-on-year increase, 2014’s total was the third lowest in the past 10 years, with only 2013 and 2009 (US$14.9 billion) being lower.

For the past few years, mining companies have been cautious about acquisitions, and since 2012 have bought fewer assets that require large capital investment. Instead, companies have maximized the value of assets they already own, and entered joint ventures that reduce costs while at least maintaining production.

Last year’s jump in total takeover value came entirely from the acquisition of base metal assets (copper, nickel and zinc), which rose from 24 deals priced at only US$3.1 billion in 2013 to 29 deals priced at US$13.1 billion in 2014. The total amount paid for gold acquisitions was the same year-on-year at US$8.5 billion, in 44 deals compared with 61 deals in 2013.

The US$13.1 billion spent on base metal acquisitions last year was more than three times the amount in 2013. The average cost of these base metal acquisitions in 2014 was US$451 million, compared with US$210 million in 2013 and US$1,170 million in 2012. This increase was almost entirely due to copper, with the spending on nickel increasing by only 4%, and zinc acquisitions tumbling 73%.

The copper deals accounted for 23 of the 29 base metals deals and almost 97% of the price paid — US$12.7 billion for 68.5 million tonnes of copper in reserves and resources. Four nickel deals totalled US$381 million for 2.5 million tonnes of nickel, and the two primary zinc deals were priced at a total of US$26.2 million for 2.1 million tonnes contained zinc. The total price paid in these base metal takeovers was only 1.8% of the value of the contained metal in the assets acquired, a slight increase over the 1.2% recorded in 2013.

Spending US$8.5 billion on gold acquisitions last year represented a fall of 3% compared with 2013. The average cost of these acquisitions was US$193 million, compared with US$144 million in 2013. Sixteen of the 44 gold acquisitions were for producing companies and mines at an average cost of US$318 million, compared with an average of US$440 million for the 15 producers acquired in 2013.

Of the combined 73 base metals and gold acquisitions in 2014, over one-third (26) were by Canada-based companies, with these deals valued at over US$9 billion, representing 42% of the total. Another 13 deals, totalling US$7.5 billion, were by Australian companies, and seven deals, totalling US$1.3 billion, were by companies headquartered in China.

The Canadian companies acquired assets at an average transaction price of US$347 million. This compared with US$578 million for purchases by Australian companies, only US$188 million by Chinese companies and an average of US$478 million in the three acquisitions by U.K.-based companies. Of the 19 other countries hosting buyers, Mexico had one buyer paying US$450 million.