Africa records growth in mining deals despite global decline

Africa records growth in mining deals despite global decline

Africa experienced a growth in mining deals of 62% year-on-year up to US$5.8 billion in 2016, according to an Ernst & Young report on mergers and acquisition deals.

This significant growth in deals on the continent comes at odds with global M&A trends, as volumes fell by 9% down to $44.3 billion last year, the lowest level since 2004.

South Africa saw the largest increase in mining deals over the year, with deal volume increasing by an enormous 78% year-on-year.

In particular purchases of Platinum Group Metals (PGM) mines drove the growth in deal volumes, which was typified by Sibanye Gold (JSE:SGL), who purchased two platinum producing mines which represented the top two deals in South Africa.

Quintin Hobbs, Africa mining and metals transactions leader at EY, said: “The surprisingly strong bull market in commodity prices in 2016, as well as renewed discipline and focus on cash preservation resulted in more lean and efficient organisations with stronger balance sheets.

“This in context of deal activity in 2015 coming off a low base resulted in increased deal activity for 2016 and can be seen as a normalisation in activity.”

Chinese investment also instigated deal growth, with two of the top ten deals by value undertaken between China and Africa.