Mining M&A May Double This Year, Ernst & Young Says (Update2)
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By Rebecca Keenan

Feb. 16 (Bloomberg) -- The value of mining mergers and acquisitions may more than double this year, snapping a two-year decline, as China and India seek to secure supplies of raw materials, Ernst & Young LLP said.

The value may rebound to 2006’s levels when $175 billion of deals were done, after halving to $60 billion last year, Ernst & Young’s Global Mining & Metals Leader Mike Elliot said in an interview. Deals peaked at $210 billion in 2007, according to a report by the consulting firm.

Mining companies such as Anglo American Plc and Vale SA sold a record amount of dollar bonds last year to bolster war chests for acquisitions, expansions and buybacks. China, the world’s largest metal consumer, may add to last year’s record $32 billion spending on resource acquisitions.

“Many mining and metals companies are looking for acquisitions to fast track supply pipelines, driven by confidence in ongoing underlying demand in China and India,” Elliot said. “We are seeing a lot larger lists of potential buyers than there are assets available.”

BHP Billiton Ltd., the world’s largest mining company, fell 0.3 percent to A$40.55 at the 4:10 p.m. Sydney time close on the Australian stock exchange and Rio Tinto Group, the third-largest, was little changed at A$70.58.

China led acquisitions last year, accounting for 24 percent of all deals, compared with 18 percent a year earlier, Ernst & Young said in the report released today. There may be the same amount of interest from China this year, Elliot said.

“The Chinese have learned very quickly how to successfully do these deals,” he said.

Companies making acquisitions may use proceeds from bond sales as an alternative to bank financing, he said.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

Last Updated: February 16, 2010 01:58 EST