04/03/2009 - 13:48

Australian mining deals dip 11% in 2008

04/03/2009 - 13:48

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Eight mining deals done in Western Australia have featured in the top 250 deals completed globally in 2008 as the value of transactions in the country fell 11 per cent.

Eight mining deals done in Western Australia have featured in the top 250 deals completed globally in 2008 as the value of transactions in the country fell 11 per cent.

In the annual Mining Deals report by PricewaterhouseCoopers, transaction values in Australia fell from a record high in 2007 of $US19.2 billion to $US17.1 billion.

"Deal momentum for Australian mining assets came to an anticlimactic end in the final quarter for 2008," PwC Australian and global mining leader Tim Goldsmith said.

"Last year was a period of unrealised promise, as many deals did not eventuate. Clearly, the resources landscape would have looked far different had the BHP / Rio merger achieved fruition."

The merger between Oxiana and Zinifex to produce OZ Minerals was the country's largest deal and the world's seventh largest, with the transaction valued at $US10 billion.

Since the merger, the OZ has hit a string of financial hurdles and was recently given a financial lifeline by China's Minmetals, which launched a $A2.6 billion takeover bid.

China's presence was also felt in Western Australia with Sinosteel Corporation successful in its takeover of iron ore miner Midwest Corporation, the country's first full takeover by a Chinese company.

PwC WA resource partner Doug Craig told WA Business News that overall, eight transactions relating to WA assets made it to the top 250 global deals, with a value of $US1.7 billion.

Included in the eight were the sale of the Kintyre uranium deposit by Rio Tinto to Cameco Corp and Mitsubishi Development for $US495 million and Cape Lambert Iron Ore's $400 million sale of its namesake project to China's MCC Mining.

"The environment in 2008 prevented Chinese companies from entering Australian resources in a meaningful way," PwC WA resource partner Doug Craig said.

"The financial crisis has changed this, with many companies in desperate need of capital. China is presently the only viable source of funding for Australia's miners.

"Chinese investors have a window of opportunity to capitalise on market conditions and access targets that might have been denied to them in other circumstances.

"The Foreign Investment Review Board (FIRB) will play a key role in determining China's ongoing involvement in Australia. A positive response by FIRB will enhance Australia's relationship with its strongest trading partner and open the door to further, much needed capital."

Globally, the value of transactions dipped 4 per cent from $US158.9 billion to $US153.4 billion. The number of deals also dropped 4 per cent from 1732 to 1668.

The average value for each deal was $US124 million in 2008.

 

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