PDAC: China Remains Small Player in Mining M&A

Chinese firms represented only 6% of global mining mergers and acquisitions in 2010, but the country will take a more aggressive approach to M&A this year, an advisory firm said Sunday.

Acquiring firms from Canada continue to the top list in mining M&A at 36% of that type of business done, with the U.S. and Australia tied for second at 16%., according to PwC's Mining Deals report.

"The reality is China has been a very active investor in global mining projects in recent years, but its current market share pales in comparison to Canada and other developed countries," says John Nyholt, national leader of transaction services, PwC. "Chinese-led M&A this decade has been impressive, but consider that Rio Tinto and Xstrata alone have completed more acquisitions during the first ten years of this millennium than all Chinese buyers collectively."

Out of 2,693 deals tracked by PwC, there were 713 deals in 2010 involving a Canadian buyer as monitored by the PwC report compared to 161 involving a Chinese buyer.

In the first month and a half of 2011, a record US$27 billion have been announced, with 81% of those involving firms with interests in gold, iron ore, coal, copper and fertilizers.

Looking ahead to the rest of 2011, PwC said firms will target junior rare earth and uranium projects and other industries like shale. Chinese firms will take a more aggressive approach to M&A in 2011 and Indian-led deals will likely focus on iron ore and coal supplies.

A challenge for miners will be outspoken criticism from governments, shareholders and non-governmental organizations, with PwC citing Canada's government rejecting BHP Billiton's takeover bid for Potash Corp. as an example.