Asia Pacific mining sector to see more M&A and increased activity in 2017

According to the latest annual Asia Pacific M&A report by Herbert Smith Freehills, mining sector including coal and gold could witness a rise in mergers and acquisitions in 2017 and bauxite will see improved activity and investment.  Factors like better commodity prices, lower production costs and Australian dollar will drive the growth in M&A.

“We anticipate more M&A activity as miners, having achieved significant cost and debt reductions and having improved profitability (and in some cases being net cash), refocus on their growth plans,” the report says.

Recently, Indonesian government has changed its mining policy regarding exports of minerals like nickel and bauxite. As part of the move, Indonesia has lifted a three-year ban on exports of nickel ore and bauxite allowing limited export. According to Bloomberg report, companies that build and invest on processing plants in Indonesia can explore extra minerals and export them for revenue. This move is expected to encourage further M&A.

In 2017, as highlighted in the report, copper and bauxite sector will also offer buyers reasons to feel happy driven by the increasing activity in these sectors, allowing them to get exposure at current improved commodity price environment.

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“The challenge in consummating deals will be achieving a match on price expectations in an improving commodity price environment,” the report stated.

The M&A activity in the mining sector fared rather poorly in 2016, the firm said. The second half of 2016 saw a rise in the prices of metallurgical coal causing damage to already completed M&A transactions, the firm said.