PWC Forecasts Record Mining M&A Value, Volume In 2012

The global mining sector is forecast to report record mergers and acquisitions volumes and value in 2012 following a busy year in 2011, said PricewaterhouseCoopers in a report Monday.

"With over $105 billion in cash, pent-up demand for new projects, rising production costs and declining develop world reserves, miners will seek out targets to build scale and achieve cost efficiencies," PWC said in its annual mining M&A report.

The year is already off to a good start following the announced merger of commodities titans Glencore International PLC (GLEN.LN) and Xstrata PLC(XTA.LN), a deal which would create a commodities juggernaut with a market capitalization of around $90 billion based on the day the deal was announced.

It would mark the largest mining transaction in history following Rio Tinto PLC's (RIO) purchase of Canada-based aluminum producer Alcan and Brazilian miner Vale SA's (VALE) purchase of Canadian nickel producer Inco.

In 2011, mining-related M&A rose 33% to $149 billion, nearly double the level of 2009 and just 2% shy of the record peak reached in 2006, PWC said.

"Despite a weak macro backdrop and falling commodity prices, 2011 marked the second busiest year in mining M&A activity in history -- more than 2,600 M&A deals worth $149 billion were announced in the global mining sector," PWC said.

PWC predicts that this year the competition for mining assets will be fierce as "non-miners" such as sovereign wealth funds, specialized equity groups and large pension funds enter the fray for mining assets.

PWC said that in it a recent poll that the chief executives of base-metals producers in Brazil, Russia, India and China -- or BRIC -- are keen to secure natural resources for their operations with about 68% of those polled planning to increase investment to secure natural resources over the next three years.

-By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328; alex.macdonald@dowjones.com

Glencore Xstrata (PK) (USOTC:GLCNF)
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