PWC predicts “record high” M&A activity will continue

A report published this week by PricewaterhouseCoopers (PWC) suggests that mining merger and acquisition activity in 2008 could exceed 2007’s record of $158.9 billion.

The report asserts that consolidation in the industry is accelerating as economic growth in emerging markets fuels demand for resources and expansion by Russian and Chinese miners increases competition for assets.

The total value of mining deals by Russian and Chinese companies rose six-fold between 2005 and 2007, to $32.7 billion.

Takeovers included Chinalco’s acquisition of Peru Copper and Norilsk Nickel’s purchase of Canadian nickel miner, LionOre.

In 2007, the number of mergers and acquisitions in the mining sector rose 69% on the previous year and Tim Goldsmith, PWC’s head of global mining, describes the industry as “experiencing an unprecedented period of change driven by M&A activity that is running at record highs at all levels of the sector”.

Should BHP Billiton’s proposed takeover of Rio Tinto succeed it would create the world’s largest miner.

The deal was valued at $147.4 billion when it was launched in February of this year, making it the second-biggest acquisition ever proposed.

The credit squeeze seems to be having little impact on the consolidation of the mining sector, with the number of deals announced in the final quarter of 2007 more than doubling on the same period of 2006.