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Miners switch M&A roles & decrease traditional takeovers so far in 2013: PwC

Miners switch M&A roles & decrease traditional takeovers so far in 2013: PwC 
TORONTO, Sept. 5, 2013 /CNW/ - A loss of confidence due to write-downs, market 
uncertainty, and falling commodity and equity prices across the mining sector 
dampened M&A activity in the first half of 2013 with deal volume dropping 31% 
from the same period in 2012, and deal values down 74% from January -June 
2013, according to PwC's Mining Deals Report. 
"Even with the industry facing a confidence crisis and large mining companies 
delivering little profitability, limited deals are still getting done," says 
John Gravelle, Global and Canadian Mining Leader, PwC. "Traditional takeovers 
of entire companies are taking a back seat to joint ventures and spinoffs. 
Expect more of these non-traditional and creative deals to round out M&A 
activity during the second half of 2013." 
As well, the mining industry's major public companies have taken on different 
M&A roles in recent months - switching from buyers to sellers. Rio Tinto plc's 
unloading its 80% stake in the Northparkes copper mine in Australia to a 
Chinese buyer is an example of this, according to the deals report. 
Gravelle adds, "Mining CEOs are taking a fresh look at what assets are core 
and plan to raise proceeds to reduce debt, improve shareholder returns and 
fund capital expenditures. They will need to concentrate on the projects they 
have and operate them with a focus on the bottom line." 
Change in mining real estate 
According to the report, Russia and Kazakhstan surprisingly took the top two 
spots for most active M&A by geography in the first half of 2013. Russia 
accounted for just over a quarter of deals, followed by Kazakhstan at 19%, and 
the U.S. with 11%. 
Russia's dominance is due to Mikhail Prokhorov - one of Russia's wealthiest 
men - selling his entire 37.8% stake in Polyus Gold International to two 
billionaire bidders from the same country for $3.62 billion, the report 
explains. Kazakhstan had the second and third largest deals, and ranked second 
highest on the list thanks to the $2.2 billion buyout of Eurasian Natural 
Resources Corp. by the three founders of the company. 
Gold and copper remain attractive for M&As
"Gold and copper continue to be the most active buyers and sellers in the 
first half of 2013 - a trend expected to continue as depressed prices create 
opportunities for those who can afford to buy," says Gravelle. 
In 2012 and 2013, gold and copper accounted for nearly half of the 
transactions in the sector by both value and volume. For the first half of 
2013, gold was the leader by value, representing 36% of transactions from 
January to June - compared with 26% for the first half of 2012. Copper 
accounted for 12% of deals by value, down from 23% a year earlier. 
What else will 2013 bring? 
Considerations for the mining industry for the remainder of 2013 include: 


    --  Juniors' survival plan - Junior mining companies will continue
        to face difficulty raising money in the current environment,
        which is expected to result in some takeovers this year and
        into 2014. A sale to a larger player may be the only way for
        juniors to generate some shareholder value or even avoid
        financial collapse.
    --  Chinese demand - While economic growth may not be in double
        digits, growth between seven and eight per cent are still
        strong - ensuring a stable demand for a number of resources,
        including copper, coal and iron ore.
    --  Making room for uranium and potash - As uranium prices
        eventually recover and demand from countries like Japan, China
        and India rise, more companies anticipate increasing production
        through acquisitions. Potash is another sector that could see
        an increase in M&A activity, with the recent cartel system
        being dismantled after Russian potash miner Uralkali CEO
        Vladislav Baumgertner walked away from its marketing
        partnership with Belarusian Potash Corp.

Gravelle concludes, "M&As in the mining sector will remain lethargic for the 
rest of 2013 and into 2014. Deals that do take place in the next six to 12 
months will include companies that have enough cash to seize the opportunity 
and as their peers unload assets that aren't considered a fit in this new 
cost-conscious environment."

For more information on the mid-year Mining Deals report, please visit PwC's 
mining site at: www.pwc.com/ca/mining.

LinkedIn: Join the PwC Mining Community www.pwc.com/ca/mining-linkedin

Follow PwC on Twitter at @PwC_Canada_LLP and on Facebook at 
www.facebook.com/pwccanada.

About PwC Canada
PwC Canada helps organizations and individuals create the value they're 
looking for. More than 5,700 partners and staff in offices across the country 
are committed to delivering quality in assurance, tax, consulting and deals 
services. PwC Canada is a member of the PwC network of firms with more than 
180,000 people in 158 countries. Find out more by visiting us at 
www.pwc.com/ca.

© 2013 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. 
All rights reserved.

PwC refers to the Canadian member firm, and may sometimes refer to the PwC 
network. Each member firm is a separate legal entity. Please see 
www.pwc.com/structure for further details.
    Abby Yung T: +1 416 687 8644 Email:abby.yung@ca.pwc.com

Kiran Chauhan T: +1416947 8983 Email:kiran.chauhan@ca.pwc.com

SOURCE: PwC Management Services LP

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CO: PwC Management Services LP
ST: Quebec
NI: FIN ECO 

-0- Sep/05/2013 11:00 GMT