Australian mining sector sees increase in deals in 2016, values slump

Australia’s mining and metals sector enjoyed an impressive 2016, with the total number of deals increasing. According to a report from global accounting and consulting firm EY, an escalation of 31 percent was witnessed in the Australian mining M&A deal volume.

On the other hand, the value of M&A slumped by 73 percent year-on-year through 2016. This comes as companies bid their time in terms of selling major assets as prices for commodities increased. The report highlights that as many as 96 deals were completed in the year – amounting to US$3.5 billion (AU$4.57 billion).

The decline in deal values can largely be attributed to sharp increase in coal prices, further prompting sellers to hold out for higher prices on assets, according to EY Oceania mining & metals transactions leader Paul Murphy.

“There was a lack of large assets available in 2016, as sellers were wary to transact while the resurgent coal price was driving up values,” he said. “However, with a number of coal assets already listed in 2017, we can expect to see this trend reversed as sellers seek to capitalise on regional demand for high quality Australian coal.”

Meanwhile, the mining sector has been touted as Australia’s highest paying industry. According to a report on jobs with the highest advertised wages by SEEK, workers in the mining sector get $115,005 on average. Those in management receive $133,169.

“Mining, resources and energy is still Australia’s highest paying industry. The decline in job advertising associated with the mining downturn looks to have finally turned and earning prospects remain strong for those working in this industry,” SEEK spokesperson Sarah Macartney said. “In Western Australia, this January, the industry enjoyed the greatest advertising growth, with job ads on SEEK up 45 per cent year on year.”

On the second spot in the list of highest paying jobs is consulting and strategy – with an average annual paying of $108,471 a year. Construction (which offers $106,693 annually) and engineering ($103,247 annually) finished third and fourth respectively.

Value of China’s acquisitions in terms of mining M&A rose by 100 percent in 2016, according to EY’s report. “The Chinese market is maturing, moving from relatively indiscrete expansionary acquisitions, to activity driven by cost efficiency, vertical integration and portfolio optimisation,” Murphy said. “In 2016, this activity was concentrated on copper assets, with Chinese buyers seeking to shore up a more stable supply, despite record exports in the calendar year.”