China = Big Money, No WhammiesThe Chinese are going to keep scooping up Canada's resources, possibly including a share of the Fox. T'is a great time to own some of this country's abundance of natural resources!Mining takeover deals to pick up in 2011 as China becomes more aggressive: PwC
Craig Wong, The Canadian Press, On Thursday March 3, 2011, 12:00 am EST
By Craig Wong, The Canadian Press
OTTAWA - Merger and acquisition deals in the miningsector are expected to pick up this year as companies look to secureproduction and China takes a more aggressive stance in 2011, a newreport suggests.
The report by advisory firm PwC predicts that 2011 willbe another record-setting year for mining deals. It says the pace isexpected to pick up as companies chase after projects amid growingdemand for raw materials.
"The economic evolution of emerging markets willunderpin demand for scarce commodities, prompting a rush to secureproduction in order to capitalize on price strengthening," the reportsaid.
While much was made about China's appetite for deals in2010, the accounting and consulting firm said Chinese firms onlyaccounted for 161 deals last year, worth about $12 billion, comparedwith an industry total of nearly 2,700 deals worth about $113 billion.
"The reality is China has been a very active investorin global mining projects in recent years, but its current market sharepales in comparison to Canada and other developed countries," JohnNyholt, national leader of transaction services at PwC, said in astatement.
But Chinese firms are expected to go on the offensivethis year. In 2011, Chinese companies will also look to develop andconsolidate the country's fragmented mining sector, PwC said.
"In a deal that we viewed as a sign of a turning tide,in December 2010, Chinalco and Rio Tinto announced a joint venture toexplore mainland China for mineral deposits," the report said.
"Unlike predecessor deals with Rio Tinto, in thisinstance, Chinalco has secured the right to be in the driver's seat,with a controlling 51 per cent interest."
The biggest takeover deal in 2010 was Newcrest Mining'sacquisition of Lihir Gold, which has operations in Papua New Guinea,Africa and Australia.
The biggest deal involving a Canadian company was thepurchase of Red Back Mining and its projects in Africa by Kinross GoldCorp. (TSX:K) in a deal that was valued at nearly $6.8 billion.
What would have been the biggest Canadian deal, had itnot been effectively killed by the federal government, was BHPBilliton's nearly $40-billion hostile takeover offer for PotashCorp(TSX:POT).
PwC said governments are becoming more active in the mining sector.
"Acquirers will need to consider what concessions theyare prepared to proved to national interests in exchange for extractiverights," the report said.